Peters v Marac Finance Limited

[2014] NZHC 1755

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-4231 [2014] NZHC 1755

IN THE MATTER OF	of the Insolvency Act 2006
IN THE MATTER OF	of the bankruptcy of James Mathew Peters
BETWEEN	JAMES MATTHEW PETERS Debtor
AND	MARAC FINANCE LIMITED Creditor

Hearing:

10, 11, 12 and 14 June 2013 and 15,16, 17, 18, 19 and 25 July

2013

Appearances:

G A D Neil/K H Kuang for creditor
D J Chrisholm QC/J D Ryan for bankrupt

Judgment:

25 July 2014

REASONS FOR JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 25 July 2014, at 6.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Meredith Connell, Auckland

Claymore Partners Ltd, Auckland

Counsel:

D J Chisholm QC, Auckland

G A D Neil, Auckland

PETERS v MARAC FINANCE LIMITED [2014] NZHC 1755 [25 July 2014]

Table of Contents

Introduction  [1] The matters before the Court  [3] Summary of the 23 December 2013 judgment  [5] Background to the bankruptcy and the estate  [9] Relevant parties  [17] Steps in the administration  [24] Applicable legal principles  [36] The contentions

The Assignee’s case – overview  [44]

Pre-adjudication conduct  [47] Post-adjudication conduct  [48] Risk to the community  [59] Mr Peters’ case - overview       [62] Response to allegations about pre-adjudication conduct                 [65] Response to allegations about post-adjudication conduct                [67] Allegation of concealment of beneficial interests in assets               [69] Alleged management and control of business  [70] Alleged risk to the community  [71] General lack of even-handedness  [72]

The matters for determination  [73] The Assignee’s report as evidence  [74] Discussion on factors for discretion

General  [90]

Disclosure of beneficial interest in trust assets  [96] The conduct in issue – general  [103] Alleged concealment of assets  [109] Alleged management and control of businesses  [116] Other conduct  [121] The perceived need for protection  [125]

Conclusion  [128]

Introduction

[1]      On 23 December 2013, I made an order discharging James Mathew Peters from bankruptcy, after the Official Assignee (I will use the abbreviated description “Assignee”) had sought an extension of the period of bankruptcy, and Mr Peters had responded with an application for discharge.1

[2]      I reached the decision just before the Court closed for the Christmas vacation, and did not have time then to give more detailed reasons.  I gave leave to either party to seek more detailed reasons.  The Assignee has done so.  These reasons are to be read, therefore, with the original judgment.

The matters before the Court

[3]      Mr Peters was eligible for automatic discharge from bankruptcy under s 290 of the Insolvency Act 2006 (the Act) on 19 October 2012.  The Assignee objected to his automatic discharge,2  resulting in a public examination of Mr Peters before the Court.3   Once the public examination was in train, Mr Peters applied for an order of

discharge.4

[4]      The Assignee opposed automatic discharge (and sought extension of the three year bankruptcy period), and opposed Mr Peters’ application for discharge, on two main  grounds.     First,  Mr  Peters’  conduct  both  before  and  after  adjudication warranted the sanction of a further period in bankruptcy.  Secondly, there was a risk to the community if Mr Peters was discharged (or, in the alternative, if he was discharged without stringent conditions on the way he conducted business in the future) because he intended to recommence business as a property developer and it

was likely that he would repeat his unacceptable conduct.

1      Marac Finance Limited v Peters [2013] NZHC 3568.

2      Insolvency Act 2006, s 292.

3      s 295.

4      s 294.

Summary of the 23 December 2013 judgment

[5]      Mr Peters’ business activities had been extensive, involving many entities, and many complicated transactions.  The Assignee produced a very substantial report for the Court in which he set out a number of concerns over Mr Peters’ activities during the period before and after he was adjudicated bankrupt.  Shortly before the hearing started he also filed a supplementary report that addressed matters raised in Mr Peters’ application for discharge.

[6]      The Assignee expressed the opinion in his report that Mr Peters’ pre- adjudication  conduct  disclosed  business  practices  that  demonstrated  a  lack  of concern for the financial interests of others, including organising his affairs ahead of his bankruptcy to enable him to continue his business activities after bankruptcy.  In addition, he took the view that there was significant post-adjudication misconduct, in that Mr Peters had allegedly failed to disclose or had actively concealed various assets in which he appeared to have a beneficial interest, and had failed to disclose his employment in and management of various entities, and in the course of doing so he had exposed innocent parties to risk and liability.   On this basis the Assignee asked the Court to exercise its discretion to extend the bankruptcy both to sanction him for this conduct and to protect the business community from his activities (he accepted that Mr Peters did not pose a risk to the public at large).

[7]        The Assignee identified a number of transactions which gave him concern, but had difficulty getting to the heart of those transactions, due in large part to the volume of documents generated in transactions by a vast number of entities and the difficulties establishing what matters needed to be put to persons who now appear to be in control of those entities.

[8]      I accepted that the matters identified in the Assignee’s report, and explored extensively, first in the public examination of Mr Peters and then in cross- examination of the various deponents in Mr Peters’ application for discharge, were proper matters of concern and justified the Assignee’s objection and opposition. However,  I also  found that  the evidence was  largely circumstantial,  and  lacked sufficient detail (when examined) to support a finding of conduct that warranted

extension to the period of bankruptcy, or to satisfy me that Mr Peters was likely to be a risk to the business community if he was discharged without the Court imposing conditions on his discharge.

Background to the bankruptcy and the estate

[9]      Mr Peters was a property developer and financier for 20 years prior to his bankruptcy.    In  that  time he bought  and  sold  a large number  of properties (he estimates the number to be around 1500), having a substantial value (he estimates the value to be around of $1 billion in aggregate).

[10]     It is common ground that he conducted his business through a number of entities  (both  companies  and  trusts),  loosely  referred  to  as  the  Starline  Group. Several entities could be used in a single development, with each entity having a distinct role in the development.  As a consequence Mr Peters has been director of, or otherwise associated with, a large number of entities in his business life (estimated to be around 200).

[11]     Again it is common ground that in or around 2007, a number of financial institutions (both domestic and foreign) advanced significant funds to these various entities for property development purposes.  Mr Peters claims that at the time of the advances the assets of the companies far exceeded their liabilities.  He provided a number of personal guarantees to the financial institutions in order to secure the funds.

[12]     In  late  2008  and  2009  credit  conditions  tightened  following  the  global financial crisis.  As at September 2008, an independent accountant, Appleby Cotter

& Associates, assessed Mr Peter’s 75% share in the Starline Group to be worth (at a maximum) $15.7 million.  The accountant stated that at the time the net value of Mr Peters’ personal “non-Starline” assets appeared to be negative.

[13]     Mr Peters was adjudicated bankrupt on 6 October 2009 on the petition of

Marac Finance Limited.5   Marac had obtained summary judgment against him for a

5      The Assignee received his statement of affairs on 16 October 2009, and so his three-year term of adjudication began on that date.

total of $3,020,318.40 in respect of a personal guarantee he had given of a loan of around $2.5 million made to a company of which he was a director, Regal Flyer Holdings Limited.  By the time of his adjudication Mr Peters’ business empire had collapsed, a fact he attributes to tightening credit conditions following the global financial crisis, leading to a drop in property values and his inability to refinance or obtain extensions to loans obtained by the various entities through which he traded. Mr Peters maintains that he did all he could to continue the developments then in progress, including investing all the substantial wealth he had built up to that point, but to no avail.

[14]     Since the bankruptcy, nine creditors have made claims against Mr Peters’ estate totalling $14,547,652.35.   Most of the claims are in respect of personal guarantees.  The Assignee understands that the estate also has liabilities under other guarantees, for which no claims have been filed.   In addition corporate entities through  which  Mr Peters conducted his  business activities  or with  which  he is associated (many of which are either in liquidation or receivership) owe significant debts. The Assignee estimates the aggregate debt to be in excess of $125 million.

[15]     Mr Peters filed a statement of affairs shortly after he was declared bankrupt. In his report for the Court the Assignee summarises Mr Peters’ contentions as to his financial position at 16 October 2009 as the following:

b)        he had no assets other than personal belongings and household effects;

c)        he was not receiving an income;

d)he  had  no  beneficial  interests  in  any  trust,  nor  had  he  made  any disposition to any trust in the past five years;

e)       he had been a director of 25 companies in the past two years, and had been responsible for running them, but no longer held any shares in them;

f)        he was no longer running any business; and

g)       he   had   potential   liability   totalling   $112,252.97   under   personal guarantees of various entities and their projects, as well as further debts (he had not stated clearly the basis of his liability for them).

[16]     Mr Peters  says  that  he  has  been  supported  throughout  the period  of  his bankruptcy by his second wife, Rebecca Burton, and by friends who have been particularly   generous   with   gifts   (particularly   a   Mr   Skates)   and   providing employment (particularly a Mr Webb-Speight).

Relevant parties

[17]     In order to understand the Assignee’s contentions about Mr Peters’ conduct it is helpful to identify the entities through which Mr Peters conducted his business, and the persons who were associated with him, either through direct involvement in his business activities prior to his bankruptcy, or who have taken over some aspects of those activities or otherwise been associated with Mr Peters since his bankruptcy. The latter includes family members and their related entities.

[18]     Entities  of  particular  significance  in  Starline  Group  prior  to  bankruptcy include:

a)        Mars S Limited, which was the focus of much of the Assignee’s early

investigations.

b)Gulf Corporation Limited, a company involved in a large and long- running development at Gulf Harbour (it started in 2001), and the recipient of a GST refund that is at issue in this case.

c)       Regal Flyer Holdings Limited, which borrowed around $2.5 million from Marac Finance Limited, and on-lent the money to other related entities, which was ultimately used by Stern Pacific Holdings Limited (an offshore company) to purchase a large boat named ‘Columbus’ in the USA.  Marac Finance intended to obtain a registered security over the boat when it was brought into New Zealand, but for various reasons

did not do so. The proceeds of the overseas sale of the ‘Columbus’ are

an issue in this case.

d)Starline Treasury JP Limited, the corporate trustee of Starline Treasury JP Trust, being the New Zealand entity to which Regal Flyer on-lent the Marac  loan,  and  which  gave  Starline  Utilities  Limited  a  general security over its undertaking (GSA) shortly before the proceeds of the overseas sale of the ‘Columbus’ were repatriated to New Zealand.

e)        Starline  Utilities  Limited,  the  corporate  trustee  of  Starline  Utilities

Trust.    This company received part of the proceeds of the sale of the

‘Columbus’, said to be in repayment of advances to entities involved in the Gulf Harbour development (to assist with completion of the development), which advances are said to be secured by the GSA.  Mr Peters is the appointer under the Starline Utilities Trust, with the power to remove and appoint trustees.  The trust deed also provides that the trustee has the power to appoint and remove beneficiaries.   The beneficiaries of the Starline Utilities Trust include the trustees of the J

& LP Trust (Mr Peters, his ex-wife Lyndel Peters and a professional trustee).   Mr Peters is a discretionary beneficiary of that trust.   The Michael Skates Family Trust was added as a discretionary beneficiary by deed dated 26 November 2010.

f)        Point Wells Trustee Limited, the corporate trustee of the Point Wells Trust.   The trust owned a property at 170 Harbourview Road, Point Wells, that had been used by Mr Peters and the family of his first marriage as a holiday home.   He lived in the property following the breakup of that marriage until it was sold in May 2011.  ANZ National Bank  held  a  first  mortgage  over  the  property.    Mr  Peters  was  the director and shareholder of the corporate trustee until he relinquished his directorship and appointed Mr Skates in his place prior to his bankruptcy.   Mr Peters worked with ANZ to effect the sale.  The net proceeds of the sale went to ANZ.

g)       A1 Trustco Limited was the sole trustee of the A1 Trust, which owned a residential property at 1/55 Mahuhu Crescent, Auckland.  ASB Bank Limited had a first mortgage over that property.  Mr Peters was the sole director and shareholder of the trustee company until shortly before his bankruptcy,  when  Mr  Skates  assumed  the  directorship.    Mr Peters worked with ASB to effect a sale of that property to Mr and Mrs Burton. ASB received the net proceeds of sale.

h)        Galleries 25 Trustco Limited is the corporate trustee of Galleries 25

Trust, which owned an apartment at 25/23 Graham Street, Auckland. ANZ Bank had a first mortgage over this property.  Mr Peters’ parents lived in that apartment until it was sold, by arrangement with ANZ, in March 2012. The net proceeds of sale went to ANZ.

[19]     The following persons were associates of Mr Peters prior to his bankruptcy, and the association continued (either directly or with entities relating to them) after bankruptcy (they worked from the same business premises in Auckland):

b)Michael Skates, who started working for the Starline Group in 2005, and now is the director of several companies.

(i)Mr  Skates  says  that  he  purchased  the  shares  in  Starline  Utilities Limited from Mr Peters (under an agreement dated 2007 that the Assignee contends was signed in about May 2009.)  Mr Skates says that he later incorporated Prime Energy Limited to acquire the power reselling business from Starline Utilities Trust (through Prime Energy Limited).

(ii)He is the settler of the Hauraki Investment Trust and the director of its corporate trustee, Hauraki Investment Trust Limited.   These entities were established in May 2009 for the purpose of investing in First Choice  Collections   (NZ)   Limited   Collections   (NZ)   Limited,   a company  that  distributed  handbags  and  fashion  accessories.    The initial beneficiaries of the trust were Mr Peters’ children.   Shortly

before his bankruptcy, Mr Peters transferred his shareholding in some

18   companies,   including   some   trustee   companies,   to   Hauraki

Investment Trust Limited.

(iii)     Mr Skates assumed the directorship of a number of companies (about

35)   within   the   Starline   Group   shortly   before   Mr   Peters   was bankrupted, (and therefore could no longer be the director), to provide some continuity while their affairs were wound up.

(iv)Mr Skates is the director and shareholder of CFL (NZ) Limited, a special  purpose  company incorporated  by Mr  Skates  as  agent  for Cook Finance Limited (incorporated in the Cook Islands and owned by Mr Skates) for the purpose of procuring litigation funding for an intended claim by Gulf Corporation Limited against the Inland Revenue Department for the GST refund eventually received by Gulf. Mr Skates and his family are also beneficiaries of the Dead Sea Trust, established in December 2009 to receive part of Gulf’s GST refund (as a shareholder distribution).

(v)Mr Skates is also the director of Private Executive Equity Limited (PEEL), incorporated in late 2009 to act as a (joint) financier of a property development  in Dunedin  by Dolphin  Street  Development Limited.  The shares in PEEL are beneficially owned by the Dead Sea Trust.  PEEL purchased part of the loan owed by the developer.  Part of the Gulf GST money was used to fund that purchase.  The loan was repaid in late 2010, and the proceeds were paid to various entities, including several associated with the Burton family.

(vi)Mr Skates also had or has an interest in Big Blast Limited and Boom Brothers Limited (he took over the former from Mr Peters, and incorporated the latter), both companies being involved in the supply and distribution of fireworks.   One of them paid for Mr Peters to travel to China with his (present) wife to attend a conference.

(vii)The Assignee contends that Mr Skates holds these entities for Mr Peters.  Mr Skates says that he has provided financial assistance (of approximately $150,000) to Mr Peters over the course of his bankruptcy, without expectation of repayment, partly in recognition of financial assistance that Mr Peters gave him when he started working for Starline Group.  A significant part of this assistance has been the transfer of funds into an account in the name of a business colleague, Ms  Dixon,  which  account  and  funds  were  made  available  to  Mr Peters.  The Assignee contends that this money belonged ultimately to Mr Peters, not Mr Skates.

b)John Schollum, a chartered accountant who worked for a variety of Mr Peters’ entities whilst in private practice with Mr Peters’ accountants BDO Spicers, and who through that association, met Mr Skates and took up a position with Starline Utilities Limited.

(i)At the time that Mr Schollum took up that position, Starline Utilities Limited was engaged in the power-reselling business.   He says that that business was transferred to Prime Energy Limited after Mr Peters’ bankruptcy, allegedly to separate it from any negative connotations flowing from Mr Peters’ former association with it (as a former owner and director).

(ii)Mr Schollum is also involved with other entities owned by Mr Skates, including CFL (NZ) Limited and PEEL.  Mr Schollum is a minority shareholder in Mainstay Equities Limited, a finance and finance broking company in which the Burton family holds the majority shareholding (through a family trust).

c)     Michael Webb-Speight, who was employed by Gulf Cooperation Limited from mid 2007 until it went into receivership in 2009 and in that capacity, was engaged in the Gulf Harbour development.

(i)Mr Webb-Speight is a director and shareholder of a company that is the general partner of a limited partnership named Consent Management LP.    That entity provides property development management services to two other entities in which Mr Webb-Speight has an interest: MHL Limited and the Grace Road Trust.   In 2008

MHL Limited took over the property development business of a company within  the  Starline  Group.    The  Grace  Road  Trust  is  a trading trust set up to complete a residential property development in Tauranga.  Mr Webb-Speight and two other persons (unrelated to Mr Peters) are the beneficiaries of that trust.

(ii)Mr Webb-Speight says that Consent Management LP has employed Mr   Peters   during   his   bankruptcy   (given   Mr   Peters   extensive experience  in   the  field)  and   that   MHL  has   met   part   of  his remuneration.

d)Brenda Dixon, who met Mr Skates first in 2001 (in a social rather than a business context).  Ms Dixon worked in the finance industry.  She met both Ms Burton and  Mr Peters’ in 2004 while working  at Strategic Finance Limited, and became a close friend of Ms Burton in particular.

(i)     Ms  Dixon  became  involved  in  the  formation  of  PEEL  in  late

2009/early 2010.  Ms Dixon was made its sole director, and held the shares in it on trust for the Dead Sea Trust.  Mr Schollum says that initially it was intended she would have a beneficial interest in PEEL but that did not eventuate.

(ii)Ms Dixon gave Mr Peters the use of a bank account in her name (including the use of an eftpos card operating on that account). A part of  Gulf’s  GST  refund  and  part  of  the  proceeds  of  sale  of  the

‘Columbus’ were paid into that account.

The Assignee relies heavily on statements made by Ms Dixon in an interview with the Assignee (she has not been asked to provide an affidavit on these matters).

e)      Brendal Thompson, who was a friend at Mr Skates and through him met Mr

Peters in early 2009.

(i)     Ms Thompson incorporated First Choice Collections (NZ) Limited

Collections (NZ) Limited (First Choice Collections (NZ) Limited) on

30 March 2009 to start a business distributing handbags and fashion accessories.  Fashion Distributions Limited, a company owned by her partner, Andrew Little, held a licence for the distribution of a range of handbags and accessories.   In April 2009 Mr Little and Mr Peters signed an agreement under which Mr Peters was to obtain funding for First Choice Collections (NZ) Limited’s purchase of stocks, and Mr Peters received an option to purchase 50 per cent of the shares in the company.

(ii)In July 2009 First Choice Collections (NZ) Limited Collections (NZ) Limited received a loan of $250,000, which was advanced through “Starline” (it is not clear whether this was Starline Utilities Limited or another company in the Starline group), and 50 per cent of the shares in First Choice Collections (NZ) Limited Collections (NZ) Limited were transferred to Hauraki Investment Trust Limited.

(iii)First Choice Collections (NZ) Limited collapsed in late 2011, after running into difficulties with a joint venture in Australia.

(iv)The Assignee relies on statements by Ms Thompson in her affidavit to the effect that Mr Peters was actively involved in the management of First Choice Collections (NZ) Limited.   The Assignee obtained an affidavit from Ms Thomson in the course of his administration of the estate, but Mr Peters did not obtain an affidavit from her to support the application  for discharge  and  she was  not  made available for

cross-examination  by  Mr  Peters  (notwithstanding  that  Mr  Peters requested this).

[20]     Mr Peters has been married twice.  His first wife, Lyndel Peters, is a creditor in Mr Peters’ estate in bankruptcy. At the time of the public examination relationship property proceedings between her and Mr Peters were extant in the Family Court. Mrs L Peters obtained an injunction in the Family Court on 2 October 2009 preventing Mr Peters from dealing with any assets, including some assets that other parties (particularly Mr Skates) say belong to them.  Mr Peters contends that the way that his associates (particularly Mr Skates and Ms Dixon) supported him after that time  was  a  response  to  the  breadth  of  this  injunction.    Because  of  the  joint trusteeship  and  joint  holding  of  the  power  of  appointment  of  trustees,  any distribution from the J & LP Trust needs Mrs L Peters’ approval.

[21]     Mr Peters says that Ms Rebecca Burton and her family have been engaged (indirectly) with him in several transactions both prior to and during the period of his bankruptcy:

b)     Ms Burton’s parents, James and Anne Burton, purchased the property at

1/55  Mahuhu  Crescent, Auckland,  from A1  Trustco  Limited,  corporate trustee of the A1 Trust that owned the property.  Prior to his bankruptcy Mr Peters was the sole director and shareholder of A1 Trustco Limited.   Mr Skates assumed its directorship following Mr Peters’ bankruptcy.  Mr Skates says that he did so to facilitate sale of the property, undertaken in consultation with the mortgagee, ASB.  The Assignee says that Mr and Mrs Burton purchased the property, in part, with money transferred from PEEL after it was repaid its share of the loan for the Dolphin Street development. Mr Skates says that he agreed to advance that sum to them.

c)      Ms Burton incorporated Mainstay Equities Limited in February 2010.   It carries on business as a financer and finance broker.   Mr Schollum has a minority  shareholding  in  it.     Mr  Schollum  says  that  Mr  Peters  has introduced potential borrowers and investments to Mainstay but has no

ownership interest in it and, to the best of Mr Schollum’s knowledge, has

not profited in any way from the introductions.

d)Hauraki  Investment  Trust  Limited  transferred  its  shareholding  in  First Choice Collections (NZ) Limited to the trustees of the Rebecca Burton Family Trust on 2 December 2010.  Mr Peters contends that this reflected the beneficial ownership of his shares.  Prior to that, in September 2010, the initial advance by Starline became part of a larger loan facility granted by Mainstay.  Mainstay appointed a receiver on 13 January 2012.  The receiver sold First Choice Collections (NZ) Limited’s stock to BP Fashion Distributors  Limited,  a  company  incorporated  by  Ms  Burton  on  21

December 2011.   The Assignee contends that this trust is a vehicle for

holding property for Mr Peters’ benefit.

[22]     The  following  persons  also  gave  evidence  in  support  of  Mr  Peters’

application for discharge:

b)     Clinton Webber

Mr Webber met Mr Peters while working for ANZ, which was funding a number of Mr Peters’ projects.  He formed a group of finance companies (Rifleman Group) with Mr Peters and another person in 2006.  In 2012 he purchased 25/23 Graham Street from Avon Trust Co Ltd.  His marriage had broken up and he was looking for a place to live.  Mr Peters told him that the Graham  Street  property was  to  be put  up  for mortgagee sale.   Mr Webber said he was already familiar with the apartment (having been involved in its original finance) and after seeing it by arrangement with Mr Peters’ parents, negotiated the sale price with ANZ prior to submitting the successful offer through the agent handling the sale.  He says that Mr Peters did not  profit  in  any way from  the transaction  and  does  not  have  any ownership interest in the properties.

(b)     Richard Hornell

Mr Hornell is the sole director of Boom Brothers Limited (the ultimate shareholder of the company was Mr Skates) together with another similarly named company Boom Brothers NZ Limited (the shareholding in which is held by himself and indirectly, Mr Skates, Mr Schollum and Mr Burton). He says that Mr Peters has no involvement in the management of or control over that company, nor any ownership or interest in it.  He is also general manager of BP Fashion Distribution Limited (the company that acquired the stock of First Choice Collections (NZ) Limited from its receiver).  He says that  Ms  Burton  is  the  sole  shareholder  of  that  company,  and  that  the purchase of stock was funded by Mainstay Equities Limited.  He says that Mr Peters is not involved in the management or control of that company and does not have any ownership or interest in it.

(c)     Paul Sills

Mr Sills is a barrister, and was the receiver of First Choice Collections (NZ) Limited.  He says that he was appointed by its security creditor, Mainstay Equities Limited.  He says that his dealings with Mainstay were always with Mr Schollum (as a director and shareholder).  He says that Mr Peters at no time represented Mainstay or made any decisions regarding the conduct of the receivership, nor provided any funds to assist First Choice Collections (NZ) Limited during the receivership (Mr Sills says he procured advances from Mainstay to meet the costs of receivership).  He says that eventually the bulk of the stock was sold to Mainstay in exchange for its secured debt (with the remainder of funds used to pay the operating costs of the receivership, including the costs of warehousing stock in Australia).   He says that the only role that Mr Peters had in the receivership, to his knowledge, was as an agent for the 50 per cent shareholder, the Rebecca Burton Family Trust.

(d)     Mathew Carson

Mr Carson acted as a solicitor for both Mr Peters and Mr Skates from time to time.  He says that he incorporated Hauraki Investment Trust Limited as a

trustee company for the Hauraki Investment Trust, with his firm’s nominee company holding its  shares  on  trust  for Mr Skates  and  for  the  special purpose of acting as trustee for Hauraki Investment Trust.   He said that Hauraki Investment Trust was established to invest in First Choice Collections (NZ) Limited for the benefit of Mr Peters’ children.   He says that to the best of his knowledge Mr Peters had no beneficial interest in or offers of power under that trust.  Mr Carson also says that he acted for A1

Trustco Limited on the sale of 1/55 Mahuhu Crescrent.   He says that he informed the Assignee and ANZ fully as to the details of the sale.   He confirms that the net proceeds of sale were remitted to ANZ.  He also says that Mr Skates was the sole director of Point Wells Trustco Limited prior to Mr Peters’ adjudication.  He said that he acted for the sale of the Point Wells property, and in the course of doing so informed ANZ fully as to the details. He confirms that the net proceeds of sale were remitted to ANZ.

(e)     Steven Davies

Mr Davies is a solicitor.  He has acted for Mr Burton since 1995.  He says that his firm set up the James & Burton Family Trust in 2006, and refers to its investment in a property at 86 Omaha Flats Road in 2009.  Mr Peters and Ms Burton lived in that property for a time during Mr Peters’ bankruptcy, prior to its sale in 2012.  Mr Davis also says that he acted for Mr and Mrs Burton on the purchase of the property of 1/55 Mahuhu Crescent from A1

Trust Co Limited.   He says that as a result of an enquiry made since the purchase, Mr Burton has instructed him that a sum of $155,000 put toward the purchase price was borrowed from one of Mr Peters’ associates, not from Mr Peters.

(f)     Nigel Milton

Mr Milton is a chartered accountant and partner in the accounting firm BDO.   He provided accounting and taxation advice to entities associated with Mr Peters in the Starline Group between 1996 and 2009. He confirms that he has disclosed to the Assignee all information held by BDO which

was requested during the Assignee’s investigation of Mr Peters’ estate.  He says that he is aware that the Assignee has raised issues over the formatting and content of certain financial statements provided by Mr Peters in connection  with  his  estate,  but  says  that  to  the  extent  that  they  were compiled by BDO they comply with the requirements of Inland Revenue and with relevant accounting standards.  He also comments that the size of Mr Peters’ property development business was such that it was impossible for one person to stay on top of all matters, and as a consequence he knows that Mr Peters engaged professional advisors to ensure that all relevant accounting and governance standards were met.

(g)     Bruce McKay

Mr  McKay  is  a  company  director  and  finance  professional.    He  has prepared a report setting out the ownership of entities using or having their registered office at 501/8 Commerce Street, Auckland, or being related to those entities.  He says that the purpose of the report (sought by Mr Peters) was to demonstrate that the entities were not related,  as defined in the Companies Act, to Mr Peters.  He has obtained statutory declarations from the shareholders and the directors of the entities, including Mr Skates, Mr Webb-Speight and Mr Schollum.   On the basis of the statements in those declarations as to the nature of each person’s relationship with the perspective entities and with Mr Peters, he states that the entities have no activities of any type with Mr Peters save that he had some involvement in the sale of fireworks for Boom Brothers Limited and Boom Brothers Fireworks Limited and that Mr Peters is an employee of Consent Management LP, which is development manager for a project owned by two of the companies, MHL Limited and MH Gill Limited (companies owned ultimately by MHL Trust).

[23]     The  following  persons  gave  an  affidavit  in  support  of  the  Assignee’s opposition to Mr Peters’ application of discharge:

(a)     Marc Graham

Mr  Graham  is  a  senior  insolvency officer  employed  by the  Insolvency Trustee Service, a business unit of the Ministry of Business, Innovation and Employment.   He is responsible for the day-to-day administration of Mr Peter’s bankrupt estate, having taking over that role in the first half of 2011 when the former insolvency officer responsible for that administration, Mr Viljoen, was promoted to Deputy Assignee (Mr Viljoen continues to have overall responsibility for the estate).   Mr Graham produced records of a number of Mr Peters’ companies, obtained from the Companies Office.  The records showed a change of director from Mr Peters to Mr Skates shortly before Mr Peters’ adjudication.

(b)     John Hicks

Mr Hicks is a chartered accountant employed by Ministry of Business, Innovation  and  Employment.    Mr  Hicks  assisted  Mr  Viljoen  and  Mr Graham  with investigations into the estate (and  had previously assisted another Deputy Assignee who first had responsibility for the estate).   Mr Hicks gave evidence of the investigation and of exchanges between the parties  in  relation  to  the Assignee’s  requests  for  records  of  Mr  Peters’ affairs.  Mr Hicks produced copies of his reports, to which were appended a substantial number of documents on which he based his report.

Steps in the administration

[24]     The Assignee first met with Mr Peters on 19 October 2009 (at which point he had completed and delivered a statement of affairs).  The Assignee asked Mr Peters to supply further information.  Subsequently the Assignee formally requested both Mr Peters’ solicitors (Carson Fox Partners) and his accountants (BDO Spicers) to provide all documents in their possession relating to Mr Peters’ property dealings.

[25]     On  27  November  2010  Mr  Peters  met  again  with  the Assignee.    They discussed, amongst other things, a change in directorship and shareholding of a company that was the corporate trustee for a property at Point Wells used for a time during Mr Peters’ first marriage as the matrimonial home, and provided the Assignee with  documents  relating  to  the sale of 1/55  Mahuhu  Crescent.    Mr Peters  also

advised the Assignee that he was having his accountant complete a summary of all entities with which he had been engaged over recent years.

[26]     This summary was prepared for Mr Peters by Mr Schollum, and submitted to the Assignee on 8 December 2009.  It contained the names of over 80 companies, many of which were corporate trustees.

[27]   In February 2010 the Assignee summoned Mr Peters to attend for an examination on 22 February 2010.  Ahead of that examination, Mr Peters provided a series of charts showing the relationship between the various entities in which he had an interest.   Mr Peters was examined by the Assignee, with an investigating accountant,  Mr Hicks,  in  attendance.   The Assignee sought  further information, particularly in relationship to Mars S Limited, which was thought to be essential to relationships between the various entities.

[28]     Over the following month or so Mr Peters informed the Assignee of the extent of the documentation that had been located and an arrangement was made for Mr Peters to supply records of his trading for the two years prior to bankruptcy, together with an explanation of all other documents in storage.   Mr Peters also informed the Assignee that he would be away, and that in his absence Mr Schollum or Mr Peters’ accountant (Mr Milton) would be available to assist.

[29]     Mr Schollum assisted Mr Peters in the extraction of relevant material and at the end of March 2010 delivered the information that had been requested up to that point.

[30]     For the rest of that year, and into the following year, Mr Schollum continued to assist Mr Peters to extract information as requested by the Assignee.  BDO Spicers were also providing information through this period.   The information included a report that Mr Schollum prepared and gave to the Assignee on 3 September 2010. Following that Mr Schollum was interviewed by the Assignee about that report in December 2010,  after  which  he provided the Assignee with  further information requested in that interview.

[31]     The Assignee continued to make requests for further information in the early part of 2011, clearly as the information held was reviewed.  This led to Mr Schollum providing, in May 2011, a full list of the companies in which Mr Peters was involved pre-bankruptcy and electronic accounting records for them.

[32]     Communication continued between the parties into the second half of 2011 as the Assignee identified gaps in the records and the parties attempted to identify precisely what financial records still had to be produced.   During this time BDO Spicers collected some 400 boxes of historical material from storage and eventually, in February 2012, Mr Schollum, Mr Milton and Mr Peters met with the Assignee and reached agreement on the further information to be provided.

[33]     Subsequent to that meeting Mr Peters informed the Assignee that he had approximately 600 boxes of information (witnesses referred to a shipping container full of records) that he could make available to Assignee.  He was asked not to send any further information until the Assignee had an opportunity to reassess what he needed.

[34]     The Assignee then summoned Mr Peters to attend an examination on oath. This took place on 4 April 2012.  Following that interview, Mr Peters provided the Assignee with a list of all the files he held so that the Assignee could select which files he wished to have for his investigation.  The Assignee informed Mr Peters of the files that he wanted on 23 May 2012.  They were delivered on 25 May 2012.  On the same date the Assignee requested further information from Mr Peters arising out of the examination on 4 April.  Mr Peters responded to that request on 13 July 2012.

[35]     On 9 October 2012 the Assignee lodged an objection to Mr Peters’ automatic

discharge from bankruptcy.

Applicable legal principles

[36]     After  conducting  a  public  examination,  or  hearing  an  application  by  a bankrupt for discharge, under s 298 of the Act the Court has power to do anyone of the following:6

b)        discharge the bankrupt immediately; or c)         discharge the bankrupt on conditions; or

d)       discharge the bankrupt but suspend the order for a period; or

e)        discharge the bankrupt, with or without conditions, at a specified future date; or

f)        refuse an order for discharge, in which case it may specify the earliest date when the bankrupt can apply again for discharge.

[37]     Section 298 gives the Court a broad discretion, to be exercised in all the circumstances of the case.  The principles that the Court applies in exercising that discretion can be found in the decision of the Court of Appeal in ASB Bank v Hogg.7

In conferring a discretion expressed in the broadest terms the legislation recognises that each case will be different, that the relevant factors may vary from case to case and that the exercise of the discretion must be governed by the circumstances of the particular case having regard to the guidance provided by a consideration of the scheme and purpose of the legislation. In providing for automatic discharge after three years the legislation recognises that it is not in the public interest that the bankruptcy should endure indefinitely. In providing for earlier discharge, s 108 [now s 294] recognises that continuing the bankruptcy to the end of the three years may not be in the public interest. Whether or not it is will be a matter for decision on the particular  facts.  In  that  regard  guidance  is  provided  by  s  109(2)  [now s 296(2)] which lists matters on which the Assignee is to report to the High Court in such a case. The Court is to consider the Assignee's report as to the affairs of the bankrupt, the causes of the bankruptcy, the manner in which the bankrupt has performed the duties imposed on him or her under the Act and his or her conduct both before and after the bankruptcy, and also as to any other fact, matter or circumstance that would assist the Court in making its  decision.  Clearly  the  Court  apprised  of  the  matter  will  consider  the

legitimate interests of the bankrupt, the creditors and wider public concerns, but it is neither required nor entitled to impose threshold requirements in the exercise of the discretion so as to derogate from the breadth of the powers conferred under s 110 [now s 298]. The applicant has the onus in the sense of adducing evidence to show good cause for ordering an early discharge, but his obligation goes no further than that.

[38]     The principles to be drawn from that statement have been summarised in the

commentary to s 298 in Brookers’ Insolvency Law & Practice:8

i)          The onus is on the Assignee to satisfy the Court that it is in the public interest that the bankruptcy should continue for a further period.

ii)          The Court has a broad discretion which it must have regard to all the circumstances of the particular case.

iii)          In the absence of good reasons, a bankrupt should normally obtain a discharge. However, public interest factors may mean that an order of discharge should be refused.

iv)          Guidance in the exercise of the Courts discretion is provided by s

296(2), which lists matters on which the Assignee is to report to the High Court. Thus, the Court may consider the manner in which the bankrupt has performed the duties imposed on him or her under the Act and his or her conduct both before and after the bankruptcy and any other matters that may assist the Court in making its decision.

v)          The relevant matters therefore include: the interests of the bankrupt; the interests of the creditors; the public interest; commercial morality and the conduct of the bankrupt.

[39]     The requirement for the Court to exercise its discretion in the particular circumstances of the case means that little guidance is provided by the way judges have exercised their discretion in other cases (given that they will have done so on the particular facts of those cases).9    Notwithstanding this general proposition, the

Courts have tended to draw some guidance from the approach taken in cases having substantially similar facts.

[40]     In a recent string of judgments,10 Associate Judge Bell has observed that the relevance of the above matters can be best understood by undertaking a “purposive” approach11 and assessing the case in light of the purposes of bankruptcy.   He identified these purposes as the following:

b)        The administration of the estate of the bankrupt for creditors;

c)        Making a bankrupt accountable for his or her insolvency;

d)        Punishing the bankrupt for any misconduct;

e)Protecting the community from risks associated with the bankrupt being in business again; and

f)        Allowing the bankrupt to resume commercial-like activities freed from the liabilities for which he or she was adjudicated bankrupt.

[41]     Associate Judge Bell expanded upon his purposive approach:

b)Administration of the estate does not commonly require the period of bankruptcy to be extended beyond the normal three years because administration can continue after discharge.12

c)       Adjudication and bankruptcy can be an appropriate response to ensure accountability  for  the  giving  of  personal  guarantees.13   Given  the

10     Jamieson v Official Assignee [2012] NZHC 949, [2012] NZCCLR 8; Darby v Official Assignee

[2013] NZHC 22; McKee v Official Assignee [2013] NZHC 340.

11     McKee v Official Assignee, above n 10 at [25]. Associate Judge Bell found support for this in the Court of Appeal’s comments in ASB Bank v Hogg that the Court should have regard to the indications provided by the scheme and purpose of the legislation: Jamieson v Official Assignee, above n 10 at [10].

12     Darby v Official Assignee, above n 10 at [18].

disabilities imposed by bankruptcy, the requirement for accountability is not by itself likely to require an extension to a bankruptcy.14

d)Although  there  is  some  question  as  to  whether  it  is  a  function  of bankruptcy to punish the bankrupt for misconduct, the stigma and the disabilities that attach to bankruptcy have a punitive element.15

e)       There are elements of risk whenever any person who has been insolvent is able to re-engage in business without restrictions.  However, the mere possibility of risk is not enough.  The Court must assess whether there is evidence to establish an unacceptable risk.16

f)        The risk of further harm has to be measured against the public benefit of allowing the bankrupt to re-engage in the community (referring to dicta in ASB v Hogg in the passage I cited earlier in this judgment).17

[42]     The  comments  in  Darby  in  relation  to  punishment  need  to  be  read  in conjunction with the view expressed by Asher J in Kelly v Structured Finance Ltd: 18

The public interest is best approached from the perspective of protecting the public from the insolvent debtor. The issue is not the punishment of the debtor, but  avoiding the risk of  further conduct to the  detriment  of  the community, in particular in this case the commercial community.

This reflects the fact that the public stigma of, and the disabilities flowing from, bankruptcy are significant and enduring.

[43]     Conduct unconnected with the bankruptcy, either in producing it or affecting it after commencement, is not to be taken into account:19

Does  it  follow  that  the  judge  may  take  into  consideration  upon  the application for a discharge everything which has been done by the bankrupt

14     At [21]

15 At [22].

16 At [25].

17 At [26].

18     Kelly v Structured Finance Ltd [2009] 2 NZLR 785, at [63]; applied in re Amatch HC Auckland

CIV-2007-404-4280, 8 April 2011, at [16] (affirmed by the Court of Appeal at [2012] NZCA

439).

19     Re Barker, Ex Parte Constable (1890) 25 QB 285 (EWCA) at 293 (per Lord Esher MR); cited in

Heath & Whale Insolvency Law in New Zealand (Lexis Nexis 2011), at para 9.9.

during his past life?   It seems to me that there must be some limit; and I think the judge ought not to take into his consideration conduct which could not have had anything to do with the bankruptcy, either in producing it or in affecting it in any way after its commencement….   Only such conduct or affairs as may or can have had some effect upon the bankruptcy itself ought to be taken into consideration.

The contentions

The Assignee’s case – overview

[44]     The  Assignee  says  that  by  early  2009  Mr  Peters’ business  empire  was crumbling.  He says that at that time Mr Peters took steps to put the entities through which he conducted his business into the hands of others or to move what assets were left (and in which he had the ultimate beneficial interest) to entities apparently owned by others.   He maintains that Hauraki Investment Trust was set up as a holding entity for Mr Peters’ interests, and that the transfer of directorships and shareholdings  to  Mr  Skates  was  merely  a  ruse  to  give  an  appearance  of  the companies being distanced from Mr Peters.  He says that Mr Peters was instrumental in setting up various devices (such as the litigation funding agreement between Gulf and CFL (NZ) and the GSA that Starline Treasury JP Limited granted to Starline Utilities Trust), to channel funds of which he was the ultimate beneficial owner to other apparently separate entities.  The Assignee contends that the supposed advisory roles that Mr Peters subsequently had with various of the entities was, in fact, him undertaking the management, and exercising the control, over the various businesses.

[45]     The Assignee maintains that Starline Utilities Limited was the key to Mr Peters’ deception.   Money salvaged from the different entities was pooled in, or passed through Starline Utilities Limited, before being paid out for the benefit of Mr Peters, his second family, and all the associated companies and trusts.  He says that the trust structure of Starline Utilities Trust (the powers of appointment of trustee and beneficiaries) were a mechanism to allow him to distribute assets to himself (as a beneficiary of the J & LP Trust) and although he was unable to use that mechanism (because it was blocked by Mrs L Peters) he manipulated the various structures to achieve the same result.

[46]     The Assignee says that there are two primary factors that call for an extension of Mr Peters’ period of bankruptcy.   His misconduct, both before and after his adjudication.  The second is the risk of harm to the business community, following an unconditional discharge.

Pre-adjudication conduct

[47]     The Assignee has set out in his report the conduct of Mr Peters that is of concern (it was explored in both the public examination of Mr Peters and in cross- examination of the various witnesses on Mr Peters’ application for discharge).  He contends that the following pre-adjudication conduct warrants an extension:

b)Mr Peters gave personal guarantees, knowing that he personally did not have assets in his own name to support the guarantees:

Mr Peters estimated his exposure under guarantees to be $112,252,978, and noted that a number of banks had not submitted a claim against the bankrupt estate.  He was publicly examined on guarantees given to five creditors (in respect of borrowings by various companies including trustee companies) and in most cases acknowledged that he did not have sufficient assets personally to support the guarantees at the time they were given.  He sought to minimise the significance of the guarantees by contending that they were “a responsibility mechanism” to ensure that the giver of the guarantee assisted  the  lender  to  recover  against  other  security.     The  Assignee submitted giving a guarantee in these circumstances infringed s 419 of the Act, and that if Mr Peters wished to rely on some industry practice to this effect, he ought to have put expert banking evidence before the Court.

c)      He assumed a personal liability for debt knowing he could not meet it:

He  entered  into  a  finance  agreement  for  the  purchase  of  an  expensive vehicle.   The vehicle was repossessed.   The financer, Mercedes Benz Financial Services Limited, filed a claim in the bankruptcy for the shortfall. Mr Peters accepted in the public examination that he was unable to pay this

debt when he entered into the agreement.  The Assignee contends that Mr

Peters’ entry into this agreement was extravagant and unjustifiable.

d)     He gave false particulars of his financial position:

When  seeking finance from  St  Lawrence  Finance  Limited,  he listed  as personal assets several assets that he acknowledged during the creditors’ meeting on 4 April 2012 to be company or trust assets.  During the public examination he sought to justify his position on the basis that he was the beneficiary of loans due to a corporate trustee, notwithstanding that he was not a beneficiary of the trust.   The Assignee submits that this evidence shows recklessness and indifference to the position of his financers.

e)      He failed to provide proper corporate management to entities under his control:

i)He  failed  to  have  annual  accounts  for  a  finance  company (Ventry Finance Limited) audited, in breach of s 15 of the Financial Reporting Act 1993 (he was the director of the company).

ii)He failed to ensure that several companies of which he was director met their GST obligations.    On one occasion (acknowledged in the public examination) he arranged  for a payment to be made to Mrs L Peters from money that had been earmarked for GST. The Assignee submits his failure to account to the Inland Revenue Department for GST amounted to misappropriation of trust money.

iii)He caused Regal Flyer Holdings Limited to enter into the loan agreement with Marac Finance when it was insolvent. Although Mr Peters said in his public examination that he was unable to say when Regal Flyer was insolvent, Mr Schollum accepted in cross-examination that it was balance sheet insolvent.

iv)Companies under his control effected inter-company transfers of assets, leaving the transferor company without the assets necessary to meet its obligations.   The transfer to Starline Treasury  JP Trust  of  the  loan  money  Regal  Flyer  Holdings Limited obtained from Marac was given as an example.   The Assignee contends that Starline Treasury JP Limited’s grant of a first-ranking   general   security   interest   to   Starline   Utilities Limited ahead of the repatriation of the sale proceeds of the

‘Columbus’,  rather  than  repaying  Regal  Flyer  (and  hence Marac), was a device to channel the sale proceeds away from Marac and other creditors who might have had a claim to those funds.

v)He caused Gulf Corporation Limited to enter into the litigation- funding agreement with CFL (NZ) Limited before the need for litigation was established.  The Assignee contends that this was also a device to transfer value away from Gulf to the detriment of its creditors, and for the ultimate benefit of Mr Peters and his second family.

vi)The level of the losses that he and his companies caused to creditors was indicative of excessive risk-taking in undercapitalised ventures and the adoption of improper business practices.

Post-adjudication conduct

[48]     The Assignee contends that the following post-adjudication conduct warrants an extension:

a)      Mr    Peters    misled    the   Assignee    on    several    occasions    during    the administration of the estate (as elaborated on in [49] below).

b)He breached an undertaking given to the Family Court and an injunction issued by the Court.

c)      He interfered with the Assignee’s investigations by resisting the Assignee’s

attempt to interview Ms Burton.

d)     He hid beneficial interests in property and companies.

e)      He failed to declare to the Assignee gifts received from others and his use of

the funds put into Ms Dixon’s account.

f)      He used Ms Dixon unfairly, exposing her to risk, by using her bank account to hide activities and to carry out transactions for his benefit.

g)     He participated in the management of business entities without obtaining

the Assignee’s authorisation.

h)He took up employment with, and providing consultancy services to, related entities without informing the Assignee.

i)He failed to inform the Assignee of changes to his residence (as well as the changes to his income and employment) and failed to cooperate generally.

[49]     The Assignee says that Mr Peters misled him in the following ways:

a)        In his statement of affairs he stated that:

i.his second wife (Ms Burton) was unemployed, but later said in his public examination that she had been employed throughout;

ii.Ms Brunton was not receiving any income, but in the creditors’ meeting and again in the public examination he said that money going into her account from Gulf Management Services Limited was in relation to her employment with that company;

iii.he had sold his shares in Starline Utilities Limited to Mr Skates under  heads  of  agreement  dated  22  October  2007  which provided for an initial payment of $55,000 to be made, but in

the public examination said that the initial payment was made to

Starline Treasury JP Trust;

iv.he was not involved in Court proceedings, yet at the time proceedings  with  Mrs  L Peters  were  ongoing  in  the  Family Court;

v.he had not sold any assets in the last two years, yet he had sold a personal watch collection in around June 2009; and

vi.none of the companies of which he had been a director in the two years prior to his bankruptcy was trustee of a trust, whereas it is clear that many of them were.

b)        In his statement of affairs he failed to disclose:

i.the  money  received  from  the  sale  of  the  ‘Columbus’,  and particularly the basis for that payment, and did not inform the Assignee that the money had gone to the Starline Treasury JP Trust, or

ii.any income, yet said in the public examination he thought he was receiving income about that time from two entities (one of which was Starline Utilities Limited) for consultancy work.

iii.he denied any current involvement in a trust, but at the time of the adjudication was a trustee and beneficiary of at least the J & LP Family Trust, and in that capacity was a discretionary beneficiary of the Starline Utilities Trust (this was particularly significant as it held assets, and shortly after his adjudication received the proceeds of the sale of the ‘Columbus’).

c)      In general communication with the Assignee he made statements as to his lack of assets, or current income, yet in his public examination he accepted he  had  had  employment  and  use  of  Ms  Dixon’s  bank  account,  and

acknowledged the sale of Mahuhu Crescent (purchased by Mr and Mrs

Burton).

d)In a travel application he sought permission to travel outside New Zealand for a holiday, and for a specific period, but returned a week late, and while he was away attended a business conference in China (regarding the supply of power) without informing the Assignee.  He stated in his application that Ms Burton would be funding the trip, but it was paid for by funds coming from Starline Utilities Limited.

e)      During the creditors’ meeting on 4 April 2012, he stated that he was not a business associate of Mr Skates and he was not forthcoming about the extent of his use of Ms Dixon’s bank account, nor did he say that the funds in the account were beneficially owned by Mr Skates (matters which only emerged fully in the public examination).  The Assignee also says that there are discrepancies between what he said at the meeting and what he said subsequently about money gifted to him and in regard to both Ms Burton’s employment and his employment with Consent Management LP.

f)      In affidavits filed in the Family Court he denied having access to a bank account  or  to  funds  and  had  to  borrow  to  fund  his  living  expenses. However, in his public examination he accepted that that was factually incorrect but maintained that he was not including Ms Dixon’s bank account and the funds in it because he “did not regard that as my financial interest”. He admitted in his public examination that he received other money but said that  it  was  by  way  of  gift  or  from  employment  (although  it  was  not disclosed  fully  to  the  Assignee).     In  his  affidavit  in  support  of  his application for discharge he said that the Point Wells property was sold by mortgagee sale, but he accepted in the public examination that had been sold before the mortgagee exercised its power of sale.  He also repeated his denial of Ms L Peters’ statement that he had access to funds.

[50]     Mr Peters gave an undertaking to the Family Court on the 16 April 2008 that he would not sell the property at Point Wells until he had settled the relationship

property claims.  He accepted in the public examination that the property was sold on 30 May 2011 although the claims had not been resolved and he had not been released from the undertaking.  In his affidavit in support of his application, he said that it had been sold by mortgagee sale, after negotiation with independent third parties.   In his public  examination he accepted that the bank did not  initiate a mortgagee sale, but rather that he had worked with it to facilitate a sale.

[51]     On 2 October 2009 the Family Court issued an injunction to prevent Mr Peters from removing or dealing with any assets in New Zealand.   The Assignee identified  several  instances  where  property  in  which  the Assignee  contends  Mr Peters has an interest has been sold or disposed (namely the properties at 25/23

Graham Street and at Point Wells, the proceeds of sale of the ‘Columbus’, money paid into Ms Burton’s bank account by Gulf Management Ltd, the various gifts that he claims he was given, and the remuneration that he claimed to have received from Consent Management LP and MHL Ltd).

[52]     In relation to his allegation that Mr Peters interfered with his investigations, the Assignee  points  to  Mr  Peters’ decision  not  to  answer  questions  about  Ms Burton’s employment and income and by raising a health issue as the reason she could not attend an interview at that time.  The Assignee declined an offer to have her swear an affidavit on specified matters as he considered that Mr Peters would have the opportunity to manipulate Ms Burton’s responses.

[53]     The Assignee says that Mr Peters concealed his beneficial interest in the proceeds of sale of the ‘Columbus’ and in Gulf’s GST refund.  He also says that Mr Peters holds a beneficial interest in:

(a)     Mainstay Equities Limited (because the funds in Ms Dixon’s bank account were beneficially owned by him, and were invested in Mainstay).

(b)First Choice Collections (NZ) Limited (by reason of the investment by the Burtons of the proceeds of sale of 1/55 Mahuhu Crescent).

(c)     PEEL (became the shares held by Ms Dixon beneficially belonged to him).

[54]     In the event that the Court should decide that Mr Peters did not have a beneficial interest in the hidden assets, the Assignee says that he failed to declare receipt of money gifted to him or otherwise paid into Ms Dixon’s bank account and used by him.   The Assignee says that $694,994.54 withdrawn from Ms Dixon’s account was used for the benefit of Mr Peters and his family.   He says that these sums were property that vests in the Assignee, and his failure to disclose them was a

breach of duty to disclose property acquired before discharge,20 or the duty to declare

changes of income.21

[55]     The Assignee says that Mr Peters used Ms Dixon to effect transfers of funds for his own benefit and to conduct business activities (through PEEL, which the Assignee contends was in fact controlled and directed by Mr Peters).  The Assignee contends that this was an improper manipulation of Ms Dixon.

[56]     The  Assignee  contends  that  Mr  Peters  was  managing  PEEL,  Hauraki Investment Trust Limited, Mainstay Equities Limited, BP Fashion Distributers Limited and Consent Management LP without the Assignee’s authority.22

[57]     In  relation  to  his  accusations  that  Mr  Peters  failed  to  inform  him  of consultancy work, the Assignee says that Mr Peters was providing consulting and advisory  services  to  several  entities,  and  took  employment  with  MHL  Limited without disclosing those matters (the Assignee learned of the employment with MHL at the creditors’ meeting on 4 April 2012).

[58]     In relation to his allegation that Mr Peters failed to cooperate generally, the Assignee says that Mr Peters tended to provide information that was inadequate or at times misleading, he failed to inform the Assignee of his association with trusts and of property he required post adjudication.  In addition he failed to be “up front with

the Assignee” about his employment and other business activities, and the combined

20     Insolvency Act 2006, s 139.

21     Section 145(d).

22     Thereby breaching s 149(1).

effect of these matters was that he hindered the administration by diverting the

Assignee’s attention away from assets that could be realised.

Risk to the community

[59]     The Assignee observes that Mr Peters wishes to return to work in the property industry.   He notes that one of the purposes of the restraints imposed during bankruptcy is the protection of the community.23   He relies on the same conduct for which he says further sanction is required as evidence of unacceptable risk taking (namely assuming principal liability for debts or given guarantees without having the resources to meet them, the use of complex  structures including trusts, and the

pattern of passing money between  entities) and  as  indicating an  indifference to creditors.  He invites the Court to consider the number of entities that have gone into liquidation or receivership, the level of the losses, and the lack of transparency as to the  true  beneficiaries  of  the  assets  and  funds  being  moved,  as  presenting unacceptable risk to the community.

[60]     The Assignee says that the Court should disregard Mr Peters’ proclamation that he has no particular interest in being a director of a company (stating that if that was the case, there was no need to object to the extension).  The Assignee also says that the risks will not be mitigated by imposing conditions on discharge as the Court cannot be satisfied (given Mr Peters’ conduct since adjudication) that he will comply with the restrictions that are available under s 299 of the Act (no management or control of companies, no taking up positions as a director, and no employment by relative or any entity controlled by a relative).

[61]     Lastly, the Assignee acknowledges the principle that there is a public benefit in allowing a bankrupt to reintegrate himself with the business community, but says that this is outweighed in the present case by the level of the risk.  To the extent that the  Court  was  to  consider  that  no  further  extension  is  warranted,  the Assignee

contends that the conditions available under s 299 should be imposed.

23     Darby, above n 13, at [24] - [25].

Mr Peters’ case - overview

[62]     Counsel for Mr Peters submitted that the Assignee had not satisfied the onus of establishing good reason for the exercise of the Court’s discretion against Mr Peters, taking all the evidence before the Court into account.   The essence of Mr Peters’ case is that he does not have a beneficial interests in the assets identified by the Assignee, and that the Assignee has made legally unjustifiable assumptions as to the interests that a discretionary beneficiary has in trust property.  He says that there is no admissible evidence that he has continued to manage businesses following his bankruptcy,  or  that  he  will  pose  a  legitimate  risk  to  the  business  community. Counsel submitted that the Assignee’s case, even after the evidence of Mr Peters in the public examination and the cross-examination of witnesses on the application to discharge, was dependent upon inferences.  He submitted that the Assignee’s report was based on hearsay and assumptions with respect to the significant allegations of misconduct (principally the concealment of assets), and that those inferences had to give way to the direct evidence of Mr Peters’ witnesses to the contrary.

[63]     Counsel  accepted  that  it  was  reasonable  to  criticise  some  of  Mr  Peters’ actions (particularly in relation to the relationship property dispute), but he submitted that the circumventing of the Family Court injunction was not a material matter for this Court, and that the Assignee had not established any other matters of serious criticism.   He said that even if it was arguable that Mr Peters had breached his obligations as a bankrupt in some respects, it was still open to the Assignee to prosecute him for those breaches, and, if it was felt that there were grounds to do so, it was still open to the Assignee to take action to recover assets that should have gone into the estate or for the Registrar to apply to have him banned as a director (notwithstanding that no steps had been taken up to the date of the hearing).    He submitted, however, that the Court should not exercise its discretion against Mr Peters as a punishment for such matters.

[64]     He  submitted  that  there  is  no  useful  purpose  to  any  extension  of  the bankruptcy as the Assignee had not established serious misconduct warranting that course, nor that there was a risk to the business community should Mr Peters be discharged (even without conditions).  He argued that the Assignee’s desire to see the

bankruptcy extended was motivated simply by a desire to punish him because, in the

Assignee’s view, Mr Peters has not been sufficiently sanctioned for his conduct.

Response to allegations about pre-adjudication conduct

[65]     Mr Peters contends that his pre-adjudication conduct does not warrant any further condemnation.

[66]     His  counsel  pointed  to  the  absence  of  any  expert  evidence  as  to  the illegitimacy of the various transactions and the handling of the proceeds, and the lack of any evidence from affected parties that they had been misled by Mr Peters. He argued that any financer seeking and obtaining a guarantee from Mr Peters could not sensibly have believed  that  he personally had  sufficient  assets  to  cover the liability, and that there was no evidence to refute Mr Peters’ contention that they were sought simply because that was standard industry practice.  He also took issue with the vagueness of the Assignee’s allegations that Mr Peters had failed to comply with obligations in relation to keeping financial records and complying with taxation obligations (such as ensuring that liabilities for GST were met).

Response to allegations about post-adjudication conduct

[67]     Mr Peters also contends that his post-adjudication conduct does not warrant an extension of the bankruptcy.   Addressing first the more general allegations of misconduct, counsel for Mr Peters submitted:

b)Mr Peters had cooperated recently with the Assignee by meeting with him on several occasions and endeavouring to respond to all of his requests for information.  He maintains that the Assignee contributed to the time taken to pursue the investigation by passing the responsibilities of locating relevant documents and records to Mr Peters (and Mr Schollum on Mr Peters’ behalf) and making requests on a piece-meal basis rather than calling for all records at the outset.

c)       Mr Peters complied substantially with his obligations, and any breach was inconsequential or minor, and can still be prosecuted after he is discharged.

d)       The Assignee’s  contentions  that  Mr  Peters  had  misled  him  in  the

statement of affairs are either speculative or petty.

e)       His  use  of  Ms  Dixon’s  bank  account  did  not  cause  or  affect  the bankruptcy.   While it was wrong in the context of the Family Court proceedings, that is not relevant in this bankruptcy proceedings.

[68]   Counsel for Mr Peters then addressed the more serious allegations of misconduct.

Allegation of concealment of beneficial interests in assets

[69]     Counsel submitted that there is no evidential basis from which to infer that any of the allegedly concealed assets are held for Mr Peters’ benefit.  He noted that Mr Peters’ witnesses had been cross-examined, and that they repeatedly confirmed that he did not have a beneficial interest in the assets or funds in question:

a)        Mr Peters was not cross-examined about the Starline Utilities Trust.

Sections 101 and 104 of the Act do not apply to property held on trust so  that  any property or  rights  concerning  property in  his  hands  as trustee do not vest in the Assignee.24   Mr Peters also denies that he was under any obligation to disclose that he was a discretionary beneficiary of the Starline Utilities Trust (given that it was not a vested interest).

b)Mr Peters’ beneficial interest in the shares in Starline Utilities Limited passed to Mr Skates in October 2007, notwithstanding that there was still an obligation to meet the purchase price.  There was no evidence

that Mr Peters continued to have control of or a beneficial interest in

24     The Assignee’s argument that the power of appointment of trustees and beneficiaries of the Starline Utilities Trust rests in the Assignee cannot apply as these are not powers exercised “for the bankrupt’s own benefit” as required by s 101(b) of the Act.

the power business either when it was still operated by Starline Utilities

Limited or after it passed to Prime Energy Limited.

c)       There was no evidence to support the Assignee’s submission that the litigation funding agreement between Gulf Cooperation Limited and CFL (NZ) Limited was a device to defeat the Bank of Scotland and to salvage money for Mr Peters.  The evidence of Mr Peters’ witnesses in respect of this transaction was not contradicted, there was no evidence that Gulf misled the Bank of Scotland, and the receivers ultimately settled with CFL (NZ) Limited.

d)     Mr  Peters,  Mr  Skates  and  Mr  Schollum  all  gave  evidence  that  Ms Dixon’s shares were not held beneficially for Mr Peters.  Additionally, the funds used by PEEL came from entities controlled by Mr Skates.

e)      Despite the Assignee’s allegations, there is no evidence as to whether Mr Peters is still a trustee of the Starline Utilities Trust or whether that trust has any assets.  However, the issue is irrelevant due to the operation in s

104 of the Act (any property or rights of the trust do not vest in the Assignee).   Further, there is no evidence of any distribution from that trust to Mr Peters or a relative, and a discretionary beneficiary does not have  legal  or  equitable  interests  in  the  assets  of  a  trust  before distribution.

f)      The evidence that Mr Peters’ children are the discretionary beneficiaries of  the  Hauraki  Investment  Trust  is  unchallenged,  and  there  is  no evidence of any distributions having been made from this trust either to Mr Peters or to his children.  Mr Carson’s evidence that Mr Peters had no beneficial interest, office or power under this trust is undisputed.

Alleged management and control of businesses

[70]     Mr Peters maintains that the Assignee relies on inference for his assertion that Mr Peters had taken part in the management and control of various entities.  He says that there is no direct evidence of any act which will support this allegation, and Mr

Peters  denies  it.    He  acknowledges  that  he  was  party to  discussions  about  the activities of those entities but he says that he did not have any responsibility for them, nor was he being paid for that participation.  He contends that the fact that he gave  advice  from  time  to  time  to  entities  such  as  Mainstay does  not  evidence involvement in its management.

Alleged risk to the community

[71]     Counsel for Mr Peters noted that the Assignee’s case was based on risk to the business community, rather than any suggestion of risk to the general public.  The risk was said to lie in a propensity to take unacceptable risks both in relation to incurring  liabilities  and  by  conducting  his  affairs  through  elaborate  business structures that distanced the beneficial interest in assets from the liabilities, and led to a likelihood of harm to his creditors.  In answer to these contentions, counsel for Mr Peters submitted:

a)       There was no admissible evidence to support the allegation that he took unacceptable business risks.  Mr Peters had been a successful property developer for more than 20 years, and in that time had obtained a vast amount   of   finance   and   developed   substantial   risk   assessment experience  (including  the  significance  of  the  balance  sheet  of  the entities seeking for finance).

b)Mr   Peters   wished   to   re-establish   himself   as   credit-worthy,   and appreciated that that could only be done by demonstrating financial prudence as he rebuilt his financial position.

c)       There was no evidence to support the Assignee’s allegation that he was not reliable or transparent in his business dealings.  To the contrary, he had demonstrated these attributes in the way he had worked with his creditors to maximise recovery on assets for their benefit. Mr Peters produced  evidence  of  appreciation  from  ASB  for  his  efforts  and personal testimonials provided by a range of persons in the business community to similar effect.

d)The only evidence potentially supporting the Assignee’s claim of lack of honesty lay in  his  response to  the injunction  in  the relationship property proceeding.  He accepted that that was inappropriate conduct, but said it had to be viewed in the context of an acrimonious matrimonial break down, rather than casting doubt on his probity in his business dealings.

e)       The Assignee had not provided any admissible evidence to support his allegation that Mr Peters was not willing to take responsibility for his actions.  To the contrary, his willingness to do so was evidenced by his attempt to negotiate reasonable outcomes with his creditors, prior to his bankruptcy, and his acceptance of the disabilities imposed on him as a bankrupt.

f)        There was no evidence to support the Assignee’s allegations that he had caused harm during the bankruptcy.   In particular, and in addition to denying the allegation that he had misused and manipulated Ms Dixon, there was nothing to indicate that she had been harmed in any way by the arrangements in respect to Mr Peters’ use of her bank account.

General lack of even-handedness

[72]     Lastly, counsel for Mr Peters submitted that the Assignee has not acted even- handedly in this proceeding.   He pointed to the Assignee’s refusal to make Mr Viljoen (the author of the Assignee’s report), Ms Dixon or Ms Thompson available for cross-examination, his refusal to supply information requested by Mr Peters,25 and to his decision not to examine a number of individuals related to Mr Peters because of his view that there was a conspiracy between them.26

The matters for determination

[73]     The essential matters for determination arising from the parties’ contentions

are the following:

25     In particular a transcript of an interview with a former employee of the fireworks companies.

26     He did not interview Mr Skates, Mr Webb-Speight, Mr Schollum, Ms Burton or Mr Burton, or any of the professionals acting.

a)       The evidential status of the Assignee’s report and whether the criticism of the Assignee’s  approach  is  justified and if so,  what  effect  these matters have.

b)Whether Mr Peters’ conduct prior to adjudication justifies an extension to the period of bankruptcy.   This in turn requires consideration of whether he deliberately divested himself of control of assets or interests prior to bankruptcy.

c)       Whether   Mr   Peters’  conduct   following   adjudication   justifies   an extension of the period of bankruptcy.   This in turn requires consideration  of  whether  he  was  beneficial  ownership  of  assets  or access to funds that have not been disclosed, whether he was involved in the management and control of businesses during the bankruptcy, and whether he has cooperated reasonably with the Assignee’s investigations.

The Assignee’s report as evidence

[74]     Before considering the opposing contentions on substantive matters, it is

necessary to address Mr Peters’ challenge to the Assignee’s report.

[75]     The Assignee’s case was largely presented on the basis of a report to the Court dated 1 March 2013, written by Deputy Assignee Christoffel Viljoen (who had overall responsibility for the day-to-day administration of the estate). The report was prepared as part of the Assignee’s statutory function to assist the Court in the public examination.27    The Assignee drew from his examination of Mr Peters and of Ms Dixon, and from the documents obtained from Mr Peters and associated entities, in compiling the report.   It was supported by ten volumes of documentary evidence, together with a supplementary report dated 7 June 2007 (annexing some further

documents).

27     Section 296.

[76]     Counsel for the Assignee examined Mr Peters on the contents of the report, and the supporting documents.  Counsel for Mrs L Peters (as a creditor in his estate) also examined him.

[77]     The Assignee  also  relied  on  the  report  for  his  opposition  to  Mr  Peters’ application for discharge (as well an affidavit by a senior insolvency officer, Marc Graham,  and  by a chartered  accountant  employed by the Ministry of  Business, Innovation and Employment, John Hicks).

[78]     Mr Peters challenged the admissibility of the report as evidence both because of its substantive content and because he was not given opportunity to cross-examine Mr Viljoen on its content (Mr Viljoen did not attend the hearing).  Counsel for Mr Peters submitted that the report was unsatisfactory evidentially asset contained significant hearsay and speculative assumptions (in the latter respect without getting expert evidence to support it).   He gave a considerable number of examples of assumptions made in the report, and of statements that “were arguably misleading”. Mr Peters had asked the Assignee to make Mr Viljoen available for cross- examination as he was the author of the report and chaired the meetings at which Mr Peters and Ms Dixon were examined.  He submitted that Mr Graham, who gave an affidavit in opposition to the discharge application and was cross-examined, had been unable to point to facts that provided cogent support for the opinions and conclusions in the report.  He argued that these unsatisfactory aspects of the report were compounded by the Assignee’s reliance on a transcript of the examination of Ms Dixon, and an affidavit obtained from Ms B Thompson in the course of administration, without calling them to give evidence of those matters so as to allow Mr Peters opportunity to explore what basis in fact (if any) there was for their statements.  He also pointed out that the Assignee had not examined a number of key persons, being the directors or trustees of entities that received property and that the Assignee contends remain under Mr Peters’ control or have been managed by him since his bankruptcy or in which he retains a beneficial interest.

[79]     Counsel  for  Mr  Peters  also  challenged  a  recent  authority  on  which  the Assignee relied, Darby v Official Assignee,28 on the grounds that the Court’s finding in that case that the report was sufficient evidence in the absence of proof to the contrary appeared to be based on a revoked rule.29

[80]     Counsel for the Assignee accepted that a number of assumptions were made in the report, and that the Assignee had expressed opinions on various matters, but argued that this did not detract from the admissibility of the report.  He submitted that the matters from which the assumptions were drawn, or on which opinions were expressed, were clearly stated in the report (often by reference to documents that were produced), and that there was a logical and reasonable basis for them.   He accepted that one matter stated as fact was not correct, and this had been acknowledged by Mr Graham in cross-examination, but submitted that it was not a significant matter and did not detract from the admissibility of the report generally. He relied on two Australian authorities as support for the view expressed in Darby

that the report was admissible.30

[81]     There is some merit to Mr Peters’ criticism of the report and the Assignee’s approach to evidence for the hearing.   In his closing submissions, counsel for Mr Peters provided a lengthy analysis of matters of speculation and assumption in the report, by reference to the use of phrases such as “appears” and “apparent”, and phrases such as the “the Assignee understands” and “the Assignee considers”.  For example, he says that Mr Skates and Mr Webb-Speight appeared to have knowingly assisted Mr Peters to continue conducting his businesses and to conceal assets (a very serious allegation that ought to be given a clear evidential foundation) and to “apparent  corporate  mismanagement”.    Counsel  also  pointed  to  mention  of  the

Assignee’s “understanding” that Mr Schollum acted at the direction of Mr Peters,

28     Darby v Official Assignee, above n 10 .

29     Rule  35  of  the  Insolvency  Rules  1970  provided  that  the Assignee’s report  was  sufficient

evidence on matters reported in the absence of proof to the contrary, but was revoked as from 1

February 2000, by Rule 4 (High Court Amendment Rules) 2 (1999/382).

30     In Re Robinson [1993] FCA 106, 40 FCR 151 the Court held that a report tendered in evidence (which had not been prepared pursuant to a statutory function) was admissible as opinion evidence provided sufficient evidential foundation was provided, with the Court to assess what weight to give it; in Re Staples 67 FCR 541 a report as to a debtor’s conduct and affairs (compiled pursuant to a statutory function) was held to be admissible.

and the Assignee “considers” that Mr Peters had primary control and management of

Hauraki Investment Trust Limited and Mainstay Equities Limited.

[82]     Mr Graham accepted in cross-examination that there were several aspects of the report that lacked an evidential basis.  Counsel for Mr Peters gave as an example the statement that Mr Peters associated with a number of offshore entities where assets were concealed, and in addition, counsel was critical of inadequate or misleading statements in the report, particularly in relation to statement made by Ms Dixon  in  her  interview.    He  noted  that  the  Assignee  drew  conclusions  from statements made by Ms Dixon, by relying on comments even where she had made it clear she had no personal knowledge of the matters on which she had been asked to comment.  He also challenged the Assignee’s statement that Ms Dixon’s impression was that Mr Schollum was acting at the direction of Mr Peters, and pointed to the transcript where Ms Dixon said “I can’t say I know for sure, but would say so”.

[83]     I accept that the report needs to be read cautiously given the number of assumptions and the conclusions that the Assignee appears to have drawn from statements which are at best equivocal.

[84]     The evidential value of the report also needs to be considered carefully given that Mr Viljoen was made available to be examined on the fact underlying his various assumptions and opinions, and the Assignee declined to present the information obtained from Ms Dixon and Ms Thompson in affidavit form (in the proceeding) so that contested statements could be tested in cross-examination.  That is a matter for the Assignee.  He is entitled to rely solely on his report, but if he does so he must accept the consequences of any short comings in the report where there is direct evidence against it.  The same could be said about the Assignee’s position in declining to interview several individuals (Mrs Skates, Mr Webb-Speight, Mr Schollum, Mrs Burton and Mr Burton).   Mr Graham was cross-examined on this decision, and said that it was because they would have “toe-d the party line”.  It is nevertheless a curious decision given the very serious allegations made against them (that they were part of conspiracy to conceal assets belonging to Mr Peters and to act as puppets for him in the operation of the businesses).

[85]     Lastly, I note that the Assignee declined to make available to Mr Peters the transcript of an interview with a person who had worked in the fireworks businesses, Kathryn Tracey.   Ms Tracey was interviewed after the public examination of Mr Peters, but the Assignee choose not to include the transcript in a supplementary report or to make it available to Mr Peters (despite his request, and Ms Tracey giving her consent).  I accept that there is a statutory prohibition on publication of records of such interviews, and that the Assignee was not obliged to provide a supplementary report producing or referring to the information gathered in the interview, but his decision not to produce further report (or take steps get Court permission to provide it to Mr Peters given Ms Tracy’s consent) can be contrasted with his filing a supplementary report just before the public examination of Mr Peters.   This inconsistency was put to Mr Graham who commented that the late filing of the supplementary report was to “bolster [the Assignee’s] position or try to strengthen up his assumptions” and he justified the Assignee’s position on Ms Tracy’s transcript on the basis that the interview was to “gather the facts”, without any obligation to make them available.

[86]     In my opinion the issue with the present case is not whether the report is admissible, but rather what weight is to be attached to it on the important matters of Mr Peters’ conduct and his involvement in business entities post adjudication, given the direct evidence provided by Mr Peters’ witness.  Given that it was prepared as part of the Assignee’s statutory function and for the purposes of informing the Court, I consider that it is admissible as sufficient evidence of undisputed matters, or even of matters where the underlying documentary evidence establishes the point clearly. However, its admissibility is subject to the court’s assessment of the weight, if any, is to be given to the affidavit if the evidence is based on hearsay, assumptions or opinions that run counter to direct evidence.

[87]     I accept that the Assignee has compiled the report as thoroughly as he could given the size of this estate, the vast amount of documentation within the various entities, and the challenges of extracting relevant information.  However, matters of hearsay and conjecture  must give way to direct and credible evidence of facts to the contrary, and the weight to be given to assumptions and opinion must also be reviewed where the underlining facts are disputed by cogent and credible evidence.

[88]     I note that counsel for Mr Peters says that the Assignee has taken an improper partisan position in his investigations, his report and his approach in this hearing, and has not put all the available evidence before the court (despite requests by Mr Peters that he do so).  In light of the discussion above I do not consider it appropriate to go so far as to say that the Assignee was acting in bad faith (which is a possible implication of Mr Peters’ contention that the Assignee was being partisan, and in any event these are not matters to take into account when assessing the evidential value of the report.

[89]     I will return to the value that should be placed on the evidence contained within the Assignee’s report.

Discussion on factors for discretion

General

[90]     The Assignee has advanced a large number of contentions about Mr Peters’ conduct.  Most of them are facets of two central themes, namely that when Mr Peters saw that insolvency was inevitable he moved what value he could salvage from the remains of his assets into entities that appear to be independent but in fact remain under his control, and that since his bankruptcy he has continued to engage in his former business activities with the use of these assets.

[91]     The largest components of the allegedly “salvaged” assets are the proceeds of sale of the ‘Columbus’ (particularly the sum of $643,000 that passed into Ms Dixon’s account), the part of Gulf Corporation Limited’s GST refund ($963,882) that went to CFL(NZ) Limited (the most part of which was used to fund PEEL or went into Ms Dixon’s account) and the sum of $250,000 used to provide working capital for First Choice in mid 2009.

[92]     The Assignee says that the beneficial interest in these assets (wherever they now reside) continues to reside with Mr Peters, who controls the entities through which the funds have passed (particularly the Starline Utilities Trust and the Hauraki Investment Trust) and the persons nominally in control of them. He regards Starline

Utilities Trust as the key to this course of deception, as he sees it as the entity into which the money salvaged was pooled.

[93]     Counsel for Mr Peters submitted that the Assignee was essentially asking the Court to “join the dots” without having established a sufficient factual basis for doing so.

[94]     In support of his case the Assignee produced documents establishing the flow of the funds (bank statements, some transaction documents, and correspondence) but otherwise relied heavily on statements made by Ms Dixon in her interview with the Assignee, and by Ms Thompson in the affidavit he obtained from her, as to dealings that they had with Mr Peters (and in the case of Ms Dixon what she observed of his dealings with others) as evidence that Mr Peters was controlling the various entities.

[95]     Mr  Peters  has  challenged  the  Assignee’s  case  both  on  the  absence  of admissible and direct fact as well as on its conceptual bases.  Mr Peters contends that the Assignee has ignored or failed to give an credence to liabilities that have given rise to payments (such as advances made to the Gulf Harbour development that gave rise to the GSA, or to the corporate and trust structures involvedin, and agreements underlying, various transactions).  In addition, counsel for Mr Peters argues that the Assignee has made unwarranted assumptions about Mr Peters’ beneficial interests in trust assets which ignore the nature of the rights of a discretionary beneficiary.  It is convenient to start with this second point as it underlies much of the Assignee’s case.

Disclosure of beneficial interest in trust assets

[96]     The Assignee contends that Mr Peters holds all the beneficial interest in the assets of the Starline Utilities Trust and the Hauraki Investment Trust (or did so at material times), and has failed to disclose that interest.   In the case of  Starline Utilities Trust this interest is said to derive from his interest as a discretionary beneficiary of that trust in his capacity as one of the trustees of the J & LP Family Trust (of which he is a discretionary beneficiary in his own right), coupled with his control of the Starline Utilities Trust by reason of his power to appoint trustees and beneficiaries.  In respect of Hauraki Investment Trust it is said to arise by reason of

the trustee’s power to distribute to Mr Peters as the parent or guardian of the beneficiaries (his children) without having to oversee the application of the distribution.

[97]     Counsel for the Assignee argued that the obligation to disclose arose because Mr Peters power of appointment of trustees and beneficiaries of the Starline Utilities Trust vested in the Assignee upon bankruptcy (relying on the decision of the Privy Council in Tasarruf Mevduati Sigorta Fonu v Merrill Lynch).31    The Privy Council held that a power to revoke was property that could be transferred to a receiver as there was no general rule distinguishing between a power and property and the ordinary  meaning  of  property  could  in  certain  circumstances  include  powers.32

Counsel  submitted that that  proposition  applied to  Mr Peters’ power to  appoint trustees and beneficiaries, so that it was property for the purposes of the Insolvency Act 2006,33   and vested in the Assignee on bankruptcy.34

[98]     Counsel for Mr Peters noted that Mr Peters had not been examined on the Starline Utilities Trust, and particularly as to whether he was still a trustee of the J & LP Family Trust or as to what disclosure (if any) he had made as to his status and entitlement, but submitted that irrespective of the failure to establish Mr Peters’ position in fact, the Assignee had not established the legal basis for any obligation to disclose it.  He argued that trust property and power does not vest in the Assignee,35 and that Mr Peters did not have a property interest in his own right (because he was a discretionary beneficiary only in his capacity as a trustee of the J & LP Family Trust)36, and that a power of appointment in respect of trust property is neither property of Mr Peters as contemplated by the definition of property in the Act, nor a power that the bankrupt can exercise in respect of property “for the bankrupt’s own

benefit”37.

31     Tasarruf Mevduati Sigorta Fonu v Merrill Lynch [2011] UKPC 17; [2012] 1 WLR 1721.

32 At [60].

33     Insolvency Act 2006, section 3.

34     In accordance with s 101.

35     Section 104.

36     See Hunt v Muollo [2003] 2 NZLR 322 at [11]

37     Section 101(1)(b).

[99]     He submitted that Tasarruf should be distinguished as it concerned a power of revocation of trusts which the defendant was able to exercise for his own benefit (he had no duty to any other so that the power would arguably be caught by s

101(1)(b)), as distinct from the present case where the power is to be exercised for the benefit of beneficiaries of the trust.   He noted the Privy Council took as its starting point the fundamental distinction between the concepts of power and property,38    and,  after  finding  that  the  power  in  question  could  be  “in  the circumstances of a case such as this” regarded as ownership, stated that there was no invariable rule that a power is distinct from ownership.39    He argued that there was no apparent purpose achieved by treating Mr Peters’ power as property for the purpose of the Act as the Assignee could not exercise it for the benefit of creditors (it had to be the exercised for the benefit of the discretionary beneficiaries).

[100]   I am not persuaded that the decision in Tasarruf should be applied in the circumstances of this case.  It would not serve any purpose of the Act to do so.  As trust property does not vest in the Assignee (it is not property of the bankrupt in terms of s 3), there is no compelling reason for a power that is to be exercised solely in relation to that trust property to vest in the Assignee.  Although s 101(1)(b) of the Act provides that certain powers (as distinct from property as determined by the definition in s 3) will vest, that provision is limited by s 104 of the Act to powers that the bankrupt can exercise for his own benefit.

[101]   It follows that if Mr Peters’ power to appoint trustees and beneficiaries of the Starline Utilities Trust does not fall within s 101(1)(b), Mr Peters is not under an obligation to disclose that power to the Assignee.   This finding significantly undermines the Assignee’s case that the channelling of funds through the Starline Utilities Trust was a device to conceal a beneficial interest.

[102]   Before leaving this topic, I should also add that there is no evidence that Mr Peters exercised this power so as to give himself a beneficial interest.  Counsel for the Assignee argued that it was sufficient that Mr Peters had the power to do so, and

that he acted, in fact, as if he had exercised it.  Mr Peters was not cross-examined on

38 At [43].

39 At [59].

this point.  It remains a matter of speculation.  The same has to be said about the Assignee’s argument that Mr Peters is to be taken to hold the beneficial interest in the Hauraki Investment Trust given that the trustee (Mr Skates) had power to distribute to Mr Peters as a parent or guardian of his children, and the evidence that Mr Peters was estranged from the children in his first marriage. There is no evidence to support any such inference.

The conduct in issue - general

[103]   The Assignee’s case relies on the facts given in his comprehensive reports, and developed in the public examination of Mr Peters and cross-examination of other witnesses.  I have summarised the salient aspects of those facts earlier in these reasons.   If the evidence did not go beyond the facts in the reports, and emerging from  the  public  examination  of  Mr  Peters,  there  would  be  a  serious  case  for inferences of serious misconduct by Mr Peters, both before and after adjudication.

[104]   However, having listened to the clear and focused submissions of counsel for Mr Peters, I am persuaded that the inference that the Assignee invites the Court to draw cannot stand against the direct evidence given by parties other than Mr Peters, not  only  Mr  Skates,  Mr  Webb-Speight,  Mr  Schollum  and  Mr  Webber  (whose evidence has to be assessed on the basis that they are friends and business associates) but also the professional advisors (Mr Carson, Mr Milton, Mr Sills and Mr Davies) who gave evidence about the entities that are in issue.  There are several aspects of

Mr Peters’ conduct that can be criticised (and he has acknowledged some of them)40

but I do not accept that inferences can be drawn in respect of the most serious allegation of misconduct (concealing assets) in face of the direct evidence of these persons as to legal and beneficial ownership of the assets.

[105]   Although  Mr  Peters’  recall  of  facts  varied  according  to  whether  the

information was helpful to him or not and Mr Skates was surprisingly vague on the detail of some of the transactions41, I do not find that enough to call into question all

40    For example, his omission of significant information in his statement of affairs, and the arrangements made with Ms Dixon to use the bank account in her name to circumvent the effect of the Family Court injunction.

41     For example, the GSA that Starline Treasury GP Ltd executed in favour of Starline Utilities Ltd

of the direct evidence of ownership of the assets in question.  In particular, I found Mr Schollum to be a credible witness, and his evidence underpins the evidence of Mr Skates and Mr Webb-Speight on questions of ownership.   He had day-to-day control of the flow of funds.  He was cross-examined extensively, and I accept his evidence that he never acted upon Mr Peters’ direction.  The evidence of the professionals as to the independent control of the various entities also supports Mr Peters’ case (I have no reason to question their evidence).  In addition, the evidence of Mr McKay, a business professional who provided a comprehensive report on the entities working out of the Central Auckland premises from which Mr Peters operated and that are now used by his business associates and the entities in issue, supports the legal independence of the entities even if there is a close physical working relationship.

[106]   The Assignee placed significant weight on information given to him in his interview with Ms Dixon.   I accept the submission of counsel for Mr Peters that there is little “hard fact” in the transcript of that interview other than in respect of Mr Peters’ use of her bank account and eftpos card (which has been acknowledged by Mr Peters) and her involvement in PEEL.  Much of what is recorded is expressed in terms of impressions and assumptions.   The Assignee did not obtain an affidavit from  Ms  Dixon  so  she  could  not  be  cross-examined  as  to  any basis  for  these impressions and assumption.

[107]   The Assignee also relied on an affidavit obtained from Ms Thompson during the course of his investigation.  The Assignee relies on inferences from statements made in that affidavit, but did not obtain an affidavit from Ms Thompson to support his opposition to the application for discharge.  I have not been able to place much weight on that affidavit where it differs from the direct evidence.

[108]   I have already referred to the challenge that counsel for Mr Peters mounted against the evidential value of the Assignee’s report.  I accept that the report can be taken as evidence of matters within it, particularly as supported by company documents, but where “facts” within the reports are challenged by cogent fresh

evidence, the Assignee needed to counter that direct evidence to meet his evidential

shortly before the proceeds of sale of Columbus were repatriated.

onus or it will stand as rebuttal to the report.   I find that to be the case in relation to the allegation of concealment of assets.

Alleged concealment of assets

[109]   The critical question in this case is whether the Assignee has met the onus of establishing serious misconduct.   In my view the allegation of concealment of beneficial interests in assets is the most serious allegation.  There are two aspects to this.   The first is that he established entities, or arranged for others to do so, to receive the “concealed” asset.  This covers the transfer of shares in Starline Utilities Trust Limited to Mr Skates, Mr Skates’ establishment of the Hauraki Investment Trust and in cooperation of its corporate trustee, and the incorporation of CFL (NZ) Limited to be a party to the litigation funding agreement with Gulf Management Service Limited.   The transfer to Mr Skates of directorships and shareholding in wide range of companies through which he had been conducting his business was a lesser  element.    The  second  aspect  is  the  transactions  by which  the  funds,  the beneficial interest in which is said to continue to reside in Mr Peters, have been moved into and through these entities, and out to others said to be controlled by Mr Peters.

[110]   If there is no evidence to the contrary, the timing of the establishment of the various entities, and the various transactions, coupled with the evidence as to the flow of funds, could support the inference of deception and a possible continuing beneficial  interest.    I say a  possible  continuing  beneficial  interest  because  it  is unclear to what extent the beneficial interest pre-adjudication belongs to Mr Peters, as to distinct from belonging to a trust (and assessment was done on Mr Peters’ worth in 2008, but that appears to be a very generally assessment taking in assets held in entities (companies and trusts), in an indirect way).

[111]   In my view, the inference that the Assignee invites the Court to draw is unavailable in the face of the direct evidence that the entities (both companies and trusts) are independent of Mr Peters, and the evidence given by Mr Skates, Mr Webb-Speight and Mr Schollum as to the control of those entities and Mr Peters’ lack of any beneficial interests.

[112]   Counsel for the Assignee submitted that Mr Peters lacked any credibility, and that I should also disregard the evidence of Mr Skates, Mr Webb-Speight and Mr Schollum having regard to the close relationship between them and Mr Peters, Mr Skates’ vague  knowledge  about  entities  and  transactions,  inconsistencies  in  the evidence of Mr Webb-Speight and Mr Schollum, and inconsistencies between the evidence of all three and Mr Peters.

[113]   The difficulty I have with the submission is that all these witnesses have given firm evidence of the lack of any beneficial interest in Mr Peters.  That is also the understanding of the professionals who have given evidence (albeit that they may not be in a position to know whether there is a hidden interest).

[114]   There is reason to question some of the evidence of these witnesses.  I found a number of Mr Peters’ answers to questions to be self-serving.  He professed to have little recall of some matters (which could be thought to be contrary to his interest) yet on other occasions  could refer directly to the documents that supported his position.  I accept the criticism of Mr Skates that he had very little understanding of some of the transactions undertaken by companies of which he is the director and shareholder.   I also accept that there were instances where both Mr Webb-Speight and Mr Schollum differed from the evidence of Mr Peters or Mr Skates. Generally, however, I accept the evidence of Mr Webb-Speight and Mr Schollum in particular, and the evidence of Mr Skates where it is supplied by that of Mr Webb-Speight and Mr Schollum.

[115]   The main thrust of their evidence was that the companies and trusts were genuine, and the various transactions had a valid basis (for example, Mr Skates’ purchase  of the shares  in  Starline Utilities Trust  Limited,  the litigation  funding agreement between Gulf Corporation Limited and CFL (NZ) Limited, the security interest granted by Starline Treasury JP Limited to Starline Utilities Limited, and various  other  transactions  later  in  the  period  of  bankruptcy).        I  accept  the submission of counsel for Mr Peters that the Assignee’s case is tantamount to say that there is a conspiracy between Mr Peters and the parties having the legal directorship or ownership of the various entities.  I am not satisfied that the direct evidence given on oath by those parties, which supports the evidence of Mr Peters in

this material respect, can be disregarded.  To the contrary, the documentary evidence can just as easily support Mr Peters’ case that the beneficial interest lies other than with him personally (particularly assets that can be traced back to one or other of the various trusts).

Alleged management and control of businesses

[116]   The Assignee contends that Mr Peters has continued to have a direct role in the management and control of his businesses after bankruptcy both as support for his argument of concealment of assets and as misconduct in his own right.   I turn now to consider the second of those concerns.

[117]   Mr Peters, Mr Skates, Mr Webb-Speight and Mr Schollum were all examined at  length  about  Mr  Peters’ involvement  in  the  activities  of  the  companies  that operated out of their common premises in Commerce Street, Auckland.  They all say that Mr Peters gave advice, and at times acted as a consultant, on property and finance matters.  However, with some relatively minor exceptions (for example, Mr Peters referred in his public examination to consultancy opportunities  that were available but were thwarted by the Family Court injunction, and there was mention of some under disclosed remuneration in late 2009 or 2010) all said that there was no firm remuneration until Mr Peters took up employment with Consent Management LP in February 2010.

[118]   I can accept that Mr Peters had extensive knowledge and experience in both the property and finance areas, and that Mr Skates, Mr Webb-Speight, Mr Schollum and Mr Burton would all have sought some advice from Mr Peters for that reason. Equally, I can understand his wish to support them to the extent that he could. Having   said   that,   the   Assignee   has   provided   evidence   (in   the   form   of correspondence) which indicates that Mr Peters was more actively involved then simply tendering advice from time-to-time.   I do not consider it necessary to determine in this proceeding whether that involvement was sufficient to constitute a breach of s 149 of the Act, (which prohibits a bankrupt from being engaged in the management or control of a business), but I consider that there is an arguable case that he was more involved than an occasional, unremunerated, source of advice.  For

example, there is correspondence passing between Mr Peters and Ms Thompson in relation to the activities of First Choice Collection (NZ) Limited which suggests that he  was  involved  in  the  strategy  and  management  decision  in  making  of  that company.   (Mr Peters sought to justify that on the basis of looking after a family interest, (being Ms Burton’s family trust).

[119]   For  the  purposes  of  the present  proceeding  I accept  that  Mr  Peters  was actively involved in a number of entities other than those by whom he became formally employed (Consent Management LP and MHL Limited).   However, although I am satisfied that there is a basis for the Assignee’s concern, I do not consider if sufficient to warrant any further extension of the bankruptcy (given that it had already extended 15 months beyond the automatic discharge date by the time I gave my judgment).   It  is still open as the Assignee to have the nature of the involvement examined in a prosecution for breach of s 149 if he consider that that is warranted.

[120]   The Assignee  was  also  critical  of  his  roles  in  the  sale  of  some  of  the properties (Point Wells, Graham Street and Mahuhu Street) but I do not see anything in that.  The mortgagee banks were involved were pressing for sale, and I accept that Mr Peters got involved in an effort to get the best possible return for the properties.

Other conduct

[121]   The Assignee  takes  issue  with  a  number  of  other  aspects  of  Mr  Peters’ conduct including failure to notify the Assignee of changes in address, employment and income, as well as a general failure to cooperate.

[122]   There is good reason for the statutory requirement to notify the Assignee of changes to address, employment and income (it may lead to put the Assignee on a path  of  inquiry  into  possible  recovery  for  creditors).    In  the  present  case,  the Assignee points to late disclosure of information about employment, and the possibility that the Assignee could require Mr Peters to make a contribution towards the estate.   I accept that there is ground for criticism of Mr Peters on all of these points, but not that that warrants any further extension to the bankruptcy.

[123]   The Assignee has also challenged Mr Peters’ cooperation and gone further to say he has thwarted the Assignee’s investigation.   I have given a summary of the administration earlier in this judgment, with particular reference to the steps taken to try to identify relevant material.  I do not accept the Assignee’s argument that this was all a contrivance to give the appearance of cooperation.   The records of Mr Peters’  activities  are  vast.     Having  heard  from  the  Assignee’s  investigating accountant Mr Hicks, I am satisfied that either he took a selective approach to the provision of material or that Mr Peters was justified in believing that was all that was required of him until very late in the bankruptcy.

[124]   In saying this, I am in no way critical of the Assignee.  Getting to the bottom of Mr Peters’ affairs was, and remains, a mammoth task.   The Assignee is not resourced for a task of this magnitude.   His deputy, Mr Graham, has referred to requests having been made to creditors to fund further investigation but at the date of hearing they had not done so.  There could be several reasons for that but the point for present purposes is that the Assignee was obliged to find an effective means of extracting relevant information from the vast bulk of material.

The perceived need for protection

[125]   The essence of the Assignee’s argument in respect of an ongoing risk is that the  way  that   Mr  Peters  conducted  his   business   prior   to   adjudication   was unacceptable risky, and that he was likely to follow the same path following discharge, with unacceptable risk to the business community.   I accept that the Assignee is right to have a concern in this area, but I accept the submissions of counsel for Mr Peters on this point to the effect that the risk is minimal.

[126]   I consider it highly unlikely that Mr Peters, a successful businessman for most of his life, will wish to run the risk of further business approbation.  His future activities will depend on the business community accepting that he has learnt from his  bankruptcy.    The Assignee  did  not  suggest  that  there  was  any  concern  for ordinary, unsophisticated members of the public.   The business community with whom Mr Peters regularly dealt, and with whom he no doubt wishes to deal with in the future, will almost certainly take extra care in their dealings with him as a

consequence of the bankruptcy, and will have the knowledge and experience to protect their position.

[127]   I am not persuaded that an extension to the bankruptcy is required on this basis.

Decision

[128]   For the reasons set out in my judgment, and as expanded upon above, I was not  persuaded  that  the  Assignee  had  established  a  sufficient  basis  in  fact  for extending Mr Peters’ bankruptcy beyond the 15 months that had elapsed from the date  that  he  would  have  been  discharged  automatically  had  the  Assignee  not

objected.

Associate Judge Abbott