Re Tootell, ex parte Rabobank Australia Ltd
[2013] NZHC 2975
•12 November 2013
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2013-454-000065 [2013] NZHC 2975
BETWEEN RABOBANK AUSTRALIA LIMITED Judgment Creditor
ANDROBERT JOHN TOOTELL Judgment Debtor
Hearing: 31 October 2013
Appearances: P Drummond for Judgment Creditor
J W Maassen for Judgment Debtor
Judgment: 12 November 2013
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to application for adjudication order
Introduction
[1] The creditor (Rabobank) obtained judgment against the debtor (Mr Tootell) in August 2012 for over AUD$6,200,000 (all reference to sums in this judgment will be to Australian currency unless otherwise noted). The debt remains unsatisfied after Mr Tootell failed to meet the requirements of a bankruptcy notice.
[2] Mr Tootell opposes adjudication. He accepts that the requirements for an order of adjudication under s 36 (and s 13) Insolvency Act 2006 are made out. He says, however, that in this a case, under s 37 of the Act, the Court should in its discretion refuse to adjudicate him bankrupt.
[3] Mr Tootell’s grounds of opposition raise two main issues for determination
by the Court:
RABOBANK AUSTRALIA LIMITED v TOOTELL [2013] NZHC 2975 [12 November 2013]
Mr Tootell has so few personal assets that bankruptcy would be pointless; and
An order of adjudication would be premature.
[4] Those are the main issues. There are other circumstances that might contribute to a finding that it would be unjust or inequitable to make an order of adjudication and I will deal also with those.
[5] Mr Maassen, for Mr Tootell submits, as an alternative to making a final determination on the adjudication application, that this would be an appropriate case in which to order under s 38 of the Act that the application be halted for a period.
General approach to adjudication
[6] The general principles which I adopt in relation to an adjudication application are these:
The creditor has the onus of establishing the allegations in its
application;
The Court may in its discretion refuse to adjudicate a debtor bankrupt (notwithstanding the jurisdiction is established) if it is just and equitable not to make an order or there is any other sufficient reason
not to make an order (see s 37(c)–(d) of the Act);
The debtor has the onus of satisfying the Court that either it is just and equitable or that some other sufficient reason exists for the Court’s not
making an order of adjudication; and
The Court is not to refuse an order of adjudication on the grounds of expediency or convenience.
Considerations affecting the discretion under s 37 of the Act
[7] A helpful list of factors relevant to the exercise of discretion under s 37 of the Act was provided by Master Williams QC in Re Epirosa ex parte Diners Club (NZ) Limited & American Express International Inc.1 Counsel invited me to accept Master Williams’s formulation of factors as a helpful reference point in this case, which I do.2
[8] Factors relevant to the exercise of the discretion include:
What are the wishes of all affected parties, including the applying
creditor, other creditors and the debtor?
Does the debtor have the ability to meet his or her debts over time and, if so, does that meet the requirements of achieving finality within
a reasonable period?
What were the circumstances in which the debt were incurred and do those circumstances suggest that the creditor is acting unreasonably in
pursuing adjudication?
Will adjudication be pointless?
Will the debtor, if adjudicated, be rendered unable to support himself or herself?
Does the debtor have such a standing in the community that
significant issues of stigma or embarrassment will result?
[9] The above list simply identifies factors which frequently arise. The Court’s
ultimate task is the consider all the facts of the case in order to determine whether it
1 Re Epirosa ex parte Diners Club & American Express International Inc HC Wellington B498/91 and B532/91, 6 March 1992.
2 At 5-8.
is just and equitable not to make an order or whether there is any other sufficient reason not to make an order.
The facts relating to Mr Tootell’s insolvency
Family situation
[10] Mr Tootell is 68 years old. He has lived at Linton with his family for 20 years (with a spell in Tasmania dealing with Tasmanian interests).
New Zealand farming
[11] Mr and Mrs Tootell are farmers. They used to farm a Linton farm in partnership. They also had a company (AFC) which owned a business and another company (Holdell) which owns the property on which AFC operates.
Family trusts
[12] The Tootells have two family trusts.
[13] Mr Tootell refers to the J & J Trust (established 21 December 2006) which owns a small rural landholding at Shannon, whose assets Mr Tootell says are:
an unencumbered land worth $150,000;
loan to Tootell Trust of $49,484.00.
[14] Mr Tootell refers also to the Tootell Trust (known also as the RJ & JL Tootell Trust). Mr Tootell says that it was settled in 1999, and that he is a trustee and a beneficiary along with his family. The records produced show that Mr and Mrs Tootell acquired units at Ahuriri, Napier in 2007 one of which later, on 10
November 2010, came to be registered in the name of the Tootell Trust trustees.
The Tasmanian venture
[15] Some time ago – Mr Tootell does not depose when – Mr Tootell became interested with others in a farming operation in Tasmania (Skerrett). Mr Tootell
became a manager and director of at least one company in that operation, with shareholdings in that and three other companies.
[16] Rabobank, the applicant in this proceeding, was Skerrett’s banker. [17] Mr Tootell for a period stayed and worked in Tasmania.
[18] At a point “about three years ago” (Mr Tootell’s most precise statement of timing) Mr Tootell became very ill while on a visit to Palmerston North. Mr Tootell remained unable to return to Tasmania for nine months. The Tasmanian venture suffered because of his absence and it ultimately failed.
[19] On 15 June 2011, Rabobank appointed receivers of Skerrett. Skerrett remains in receivership today with the receivers still in possession of the farm and the business.
[20] One of the receivers, a chartered accountant named Steven Hernyk, in April
2013 provided an affidavit in response to an application made by Mr Tootell to set aside the bankruptcy notice issued by Rabobank. Mr Tootell subsequently withdrew that application just before it was to be heard. When Mr Tootell then failed to meet the requirements of the bankruptcy notice, Rabobank made this present application. By leave it relies on all its earlier affidavit evidence, including Mr Hernyk’s.
[21] In summary, Mr Hernyk deposed:
(a) Asset position of Skerrett
Assessed value of land and buildings - 10 – 20 percent less than an earlier assessment of $3 million –$4 million. (I infer a figure of
say $2.5 million to $3.4 million).
Plant and equipment – less than $299,000.
(b) Costs of receivership
Costs of maintaining and improving the operation – $304,000.
(c) Rabobank’s security
Rabobank has security over the Skerrett property and farming
operation. Mr Hernyk’s evidence indicates a substantial shortfall between the value of that security and the debt to Rabobank.
Five individuals including Mr Tootell guaranteed the Skerrett debt to Rabobank. (There is no evidence as to what steps, if any, have
been taken against other guarantors.)
[22] Once Rabobank obtained summary judgment against Mr Tootell (on 9 August
2012) it promptly obtained a charging order, lodged against the title to the Ahuriri unit (on which Mr Tootell appears as one of the three registered proprietors).
Mr and Mrs Tootell’s relationship property
[23] Mr Tootell has produced a relationship property agreement (the s 21 agreement) which he and Mrs Tootell executed on 20 October 2010. In his affidavit, Mr Tootell explains the s 21 agreement thus:
My wife Janette owns and runs the Linton farm. I really have very little to do with it except for providing some labour when it is needed. The reason Janette owns the farming interests here is because when I was considering the Tasmanian farm business, my wife said that she didn’t want anything to do with it. We made a deal that she would retain all of the New Zealand farming interests including the livestock, plant, equipment and vehicles while I would retain my farming interests in Tasmania.
[24] A schedule to the s 21 agreement is entitled “statement of financial position as at 31 May 2010” (that is to say, some four months before the s 21 agreement was executed). The schedule appears as Schedule A to this judgment.
[25] The couple’s equity (stated to be “as per Financial Statements”) was expressed as $3,405,319. This figure and all other figures in the s 21 agreement
appear to be expressed in New Zealand currency. With other assets and debts
accounted for, the “Total Joint Assets” were shown as $4,433,955.
[26] The schedule showed that Mr Tootell was to receive one half of the assets
(that is $2,216,978) by taking over the following:
Australian Farm ($4,650,983);
Bank Debt – for Aussie advances ($1,250,000); Bank Overdraft ($201,236).
[27] The schedule shows that in order to then bring Mr Tootell to equality with Mrs Tootell, there was to be a transfer of value of $982,769 from Mr Tootell to Mrs Tootell.
[28] For her part, Mrs Tootell was to take over the Linton farm and partnership operation, the Holdell shares with its land and the AFC shares with its business. Mrs Tootell was to also receive one of the two Ahuriri units, accorded a value of
$398,617 in the schedule.
[29] The remaining Ahuriri unit (accorded a value of $450,000 in the schedule) was to be transferred to the Tootell Trust to extinguish loans. The s 21 agreement stated that there had been loans from the Tootell Trust to Mrs Tootell in the sums of
$151,865 and $272,364 (a total of $424,229). Given the difference between the value of the unit and the debts, there was to continue to be a debt of more than
$20,000 from Mrs Tootell to the trust.
[30] The s 21 agreement provided that all property not listed in the agreement was to be relationship property.
Mr Tootell’s remaining assets and liabilities
[31] Mr Tootell is a superannuitant with occasional part-time work. He deposes to having no personal assets of any significant value and, as at 29 October 2013, only
$50 in bank accounts. He says that he owes the Tootell Trust some $720,000 (a debt which appears to have no identification in the s 21 agreement).
[32] He deposes that he also has a debt to the Bank of New Zealand (for an unstated sum), which is secured by a mortgage over the Ahuriri unit owned by the Tootell Trust.
Mr Tootell’s present debt to Rabobank
[33] The guaranteed debt resulted in a summary judgment against Mr Tootell for over $6,200,000. With the interest that has since accrued, the debt stood at over
$6,400,000 when Rabobank filed this application.
Mr Tootell’s cooperation with the receivers
[34] Under s 429 Corporations Act 2001 (Commonwealth), directors of Australian companies in the event of the receivership of their company, have obligations to provide information to the receivers.
[35] Mr Hernyk deposes that between June 2011 to the date of his affidavit (in April 2013) Mr Tootell provided none of the reporting required under the Corporations Act. Mr Hernyk deposes that Mr Tootell thereby committed a breach under s 475 of the Act.
[36] Mr Tootell did not respond to that evidence, which I take to be correct. On Mr Tootell’s own evidence as to the timing of his illness,3 it seems likely that the appointment of the receivers and their demands to him for reporting fell in the middle of his illness and his enforced stay in Palmerston North. But even allowing for that, Mr Tootell offers no explanation for his complete failure to respond to the
receivers’s statutory requirements for information.
3 Above at [18].
The request that the Court exercise its discretion not to adjudicate Mr Tootell bankrupt
[37] Mr Tootell in his affidavit, and Mr Maassen in his submissions, traversed a number of factors which they suggested make it appropriate for the Court to either refuse to make an adjudication order or at least halt this application for a period.
[38] I will examine first the two major submissions, and then the remaining matters covered in submissions.
A pointless adjudication?
[39] Mr Tootell deposes that he does not consider that there is any point to his bankruptcy if the goal is to recover money. He notes that he has virtually no assets.
[40] For Rabobank, Mr Drummond chose to have Rabobank’s application heard on its first call, a situation for which Mr Maassen was prepared. But Mr Maassen submitted that the speedy circumstances in which the application has been heard should not count against Mr Tootell when it comes to considering whether Mr Tootell’s evidence of a lack of assets is or is not corroborated.
[41] I do not find any difficulty in considering in the absence of corroborative evidence the current level of Mr Tootell’s assets. They are plainly insufficient to give any hope of recovery to creditors through his bankruptcy (without the Assignee resorting to assets previously disposed of).
[42] The “pointlessness” argument is not of substantial assistance to Mr Tootell in
this case for a different reason. That lies in the s 21 agreement.
[43] Mr Tootell’s explanation of the s 21 agreement relates to Mrs Tootell’s not wanting anything to do with the Tasmanian business when Mr Tootell was considering the investment.
[44] Mr Tootell gave his guarantee to Rabobank in relation to the borrowing for the Tasmanian business in August 2006. His evidence is that he became unable to return to Tasmania to conduct the farming operation (with the result that it was not
properly looked after and therefore failed) “about three years” before he swore his affidavit on 29 October 2013. That is to say, Mr Tootell puts the start of his enforced absence from Tasmania as about October 2010. The s 21 agreement is dated 20
October 2010, the same month he identifies as the approximate start of his illness.
[45] Rabobank is entitled, through the apparent coincidence of s 21 agreement and the start of Mr Tootell’s absence from Tasmania, to be suspicious as to whether Mr Tootell has correctly explained the intent behind the s 21 agreement. Mr Tootell’s failure to cooperate in providing the required receivership reports from June 2011 also counts against any assumption that his evidence on personal assets has been full and frank. The Court cannot be satisfied he has been full and frank.
[46] There are a number of possibilities. Mr Tootell may have entered into the s 21 agreement at least in part to defeat his creditors including Rabobank. A detailed investigation into the values used in the schedule to the s 21 agreement may yet establish that as at October 2010 the parties vested greater value in Mrs Tootell. Mr Tootell’s illness and enforced absence from Tasmania might reasonably have been expected to have prejudiced the value of the Tasmanian investment, with the result that values attributed to the Tasmanian assets in the s 21 agreement may be overstated.
[47] Counsel addressed me only briefly on the remedies which Mr Tootell’s assignee in bankruptcy might have if it is subsequently established that Mr and Mrs Tootell by their s 21 agreement intentionally vested substantially disproportionate value in Mrs Tootell.
[48] Mr Maassen submitted that I should not assume that remedies will lie to unravel the s 21 agreement. He referred to s 47 Property (Relationships) Act 1976 and the two year period during which a s 21 agreement may become void. Mr Maassen noted that the two year period after the s 21 agreement was executed expired on 20 October 2012.
[49] To the extent that Mr Maassen’s submissions suggested that the Assignee
might be barred from unravelling transfers made under the s 21 agreement by reason
of the expiry of two years, such a bar is not inevitable. Under s 47(2) Property (Relationships) Act the two year limit applies where agreements were not intended to defeat creditors but simply had that effect. If the Assignee were able to establish an actual intention to defeat Mr Tootell’s creditors, then the applicable provision (s
47(1)) is unaffected by the two-year time limitation which applies under s 47(2) in the case of unintended consequences.
[50] These are not matters of intention which are amenable to determination by this Court in its insolvency jurisdiction. Issues of recovery, unless non-recovery is clear-cut, are appropriately for investigation not by this Court on an adjudication application but by the Assignee with her powers of investigation and examination in the administration of a bankrupt’s estate. Furthermore, corroboration of aspects of Mr Tootell’s evidence (assuming such were available) is not likely to provide a clear- cut answer to matters such as Mr Tootell’s intention when entering the s 21 agreement.
[51] I am not satisfied that an adjudication order would probably be pointless. On the contrary, I am satisfied having regard to the timing of the s 21 agreement that there would be good point to an adjudication order which will then bring into play the Assignee’s powers of investigation and examination.
Premature adjudication
[52] Mr Maassen submitted that it would be premature to adjudicate Mr Tootell bankrupt now. Mr Maassen put this submission on two bases –
There is no realistic prospect of the debt being paid through Mr
Tootell’s bankruptcy; and
There is a prospect that the debt could be met by funds available
through the liquidation of Skerrett which remains incomplete.
[53] The first limb of that submission (no realistic prospect of payment) is a
recasting of the “pointlessness” argument which I have already found against.
[54] I therefore turn to consider the second limb of the submission, namely the prospect of the extinguishment of Mr Tootell’s debt through recoveries to be made by the Skerrett receivers or liquidators.
[55] Mr Maassen invokes the line of authority that recognises that the debtor’s ability to pay his debts (a ground for the Court’s exercising its discretion to refuse adjudication, pursuant to s 37(b) Insolvency Act 2006) requires consideration not of the willingness of the debtor to meet the debt but rather an ability to meet the debts over time.4 The correct approach to a debtor’s contention that he or she will be able to repay the debt has more recently been explained by the Court of Appeal in Holdgate v Blocassa where Arnold J, delivering the judgment of the Court, stated:5
… a debtor will not necessarily avoid bankruptcy by showing a positive balance sheet. It is the capacity to pay either immediately or within a reasonable time that is critical.
[56] Mr Tootell has the onus of establishing such capacity to pay. I accept that the “capacity to pay” might also be present in a case where there exists a probability of extinguishment of the debt through the realisation of collateral securities.
[57] Mr Tootell does not suggest he has any prospect to personally pay the debt to Rabobank. His assertion as to a prospect of payment arises solely out of the realisations yet to occur through the receivership or liquidation of Skerrett.
[58] The basis of Mr Tootell’s evidence lies in a critique of and response to the evidence provided by Mr Hernyk as to progress in the receivership. Mr Tootell’s
evidence on key areas comes down to this –
Mr Tootell does not accept Mr Hernyk’s assessment (or the brief reports
Mr Hernyk exhibits) which put the realisable value of the land holdings significantly below $4m;
Mr Tootell believes that the livestock is worth more than Mr Hernyk’s
estimated realisation value;
4 Re Stirling ex parte Webb Ross & Co [1990] 1 NZLR 569 (HC) per Smellie J at 575.
5 Holdgate v Blocassa [2007] NZCA 132 at [19].
Mr Tootell believes that the value of plant and equipment is worth closer
to $800,000 rather than the “below $299,000” figure adopted by Mr
Hernyk;
Mr Tootell criticises Mr Hernyk’s statement that “there is a general lack
of appetite for this type of property” as being “an unqualified statement”;
Mr Tootell criticises Mr Hernyk for not referring to water rights which he believes to be a valuable asset, for which he paid “several hundred
thousand dollars”;
Mr Tootell criticises Mr Hernyk for not disclosing the income derived
from the farming operation; and
Mr Tootell criticises Mr Hernyk’s evidence for providing no reliable information that the judgment debt would not be satisfied through
Rabobank’s liquidating its security over the farming operations.
[59] Against the background circumstances which caused Rabobank to appoint receivers to Skerrett, Mr Tootell’s case as to the prospect that the debt will be repaid invites the Court to ignore the onus upon Mr Tootell. Mr Tootell’s evidence provides no reliable basis upon which the Court might reach the view that the debt will
probably be extinguished – to use Arnold J’s formulation6 – “either immediately or
within a reasonable time”.
[60] Mr Hernyk, for Rabobank, has provided a reasonable explanation for the bank’s pessimism as to prospects of a figure approaching full recovery of the debt. Mr Hernyk has referred to advice obtained as to the figures upon which his
assessments have been based. The appointment of receivers occurred following the
6 See above at [55].
nine month period of Mr Tootell’s illness and absence. Mr Tootell deposes as to that period in these terms –
Nobody else including my four co-guarantors stepped up to cover my managerial position effectively, and the company got into further financial difficulties that led to its failure.
[61] At the point of receivership Mr Hernyk deposes that farm income had significantly dropped. Cattle numbers had reduced from 1,200 to 400 in early 2011. Mr Hernyk deposes that the cattle were in poor condition, the company had limited plant and equipment and the farm equipment and infrastructure required substantial repairs and maintenance.
[62] Mr Hernyk’s evidence establishes that the receivers have expended substantial capital (Mr Hernyk deposes as to $304,000 of capital work) in order to bring the farming operation back to a presentable state.
[63] Given the undisputed poor state of the assets which the receivers took over, Mr Tootell has failed to adduce any sufficient evidence to satisfy the Court that there is any prospect that his judgment debt will be fully extinguished within a reasonable period by a successful outcome to the Skerrett receivership. There is at least a likelihood of shortfall when full realisations eventuate.
[64] Mr Maassen referred me to s 14 Insolvency Act 2006 which he submitted has relevance because of the potential for realisation of securities in this case. Section
14 provides:
14 Application by secured creditor
The Court must not make an order of adjudication on the application of a secured creditor unless the creditor has established that the amount of the debt exceeds the value of the charge by at least $1,000.
[65] Having made that reference, Mr Maassen accepted that s 14 does not strictly apply in this case. Rabobank is not “a secured creditor” of Mr Tootell within the operation of s 14. The term “a secured creditor” is defined by s 3 to mean:
…a person entitled to a charge on or over property owned by a debtor.
As the secured property in this case is owned by Skerrett and not Mr Tootell, s 14 does not apply.7
[66] Mr Maassen, notwithstanding his acceptance that s 14 of the Act does not apply to Mr Tootell’s position, submitted that there nonetheless is a policy underlying s 14 which should weigh with the Court in the present case. That, Mr Maassen submits, is a policy which favours the realisation of securities before bankruptcy.
[67] I do not find in the legislation a policy in the broad terms Mr Maassen suggests. When the debtor himself has given and the creditor has accepted security, the insolvency regime provided by Parliament in s 14 specifically for that situation precludes the making of an order of adjudication unless the creditor establishes that the amount of the debt exceeds the value of the charge by at least $1,000. Parliament has not provided the same regime where the security has been provided by someone other than the debtor (such as, in this case, the company whose debts the debtor has guaranteed). What govern the Court’s approach in the present case are the well- recognised principles under s 37 of the Act. Under s 37, the onus of proof lies on the debtor and not upon the creditor as in the s 14 situation. I am not satisfied that there is a prospect that Mr Tootell’s debts will be extinguished through realisation of other securities within a reasonable period.
Public interest
[68] Mr Maassen submitted that a further aspect of this case is that there is no
public interest factor requiring Mr Tootell’s adjudication.
[69] Mr Maassen, for this submission, placed substantial reliance upon Mr Tootell’s evidence as to a lack of assets but that has to be weighed against the circumstances in which the s 21 agreement was executed. There is the further feature of this case which counts against Mr Tootell. It lies in his failure to provide the full and frank reporting to receivers required under the Australian receivership
legislation. I accept, as Mr Maassen submitted, that there does not appear to be a
7 Brookers Insolvency Law & Practice (online ed) at IN 14.01.
line of unhappy creditors chasing Mr Tootell for his debts. On the evidence as it stands, Mr Tootell is entitled not to be treated as one who has acted with a degree of fiscal irresponsibility8 in the way he incurred his debts. I do not view this as a case where bankruptcy is appropriate as some form of expression of judicial condemnation of commercial irresponsibility. But it is a case where circumstances warrant investigation by the Assignee into the circumstances behind the s 21 agreement in particular.
Community standing
[70] Mr Tootell has given evidence as to his community involvement and interests. Mr Maassen, on his behalf, suggests that Mr Tootell’s standing in his community will mean that he will suffer increased levels of embarrassment through bankruptcy. Mr Tootell has a fear as to how bankruptcy will affect his reputation.
[71] It is proper that I have some regard to this circumstance although I note that the contribution with Mr Tootell deposes to having made to the community, while significant, is not out of the mainstream. The sporting community to which he has contributed and wishes to continue to contribute his time can reasonably be expected to still be a willing recipient of Mr Tootell’s involvement. There is no evidence to indicate that an adjudication in bankruptcy will affect the acceptance of his contribution.
Oppression through an adjudication application
[72] Mr Maassen submitted that the application for Mr Tootell’s adjudication is
oppressive. He submitted that oppression arises for three reasons:
The application has been made when unliquidated assets of significant
but unknown value will sharply reduce the debt;
Mr Tootell alone of five guarantors has been singled out for enforcement
proceedings; and
8 Adopting Master Williams QC’s description of the debtor’s conduct in Re Epirosa ex parte
Diners Club & American Express International Inc, above n 1, at 9.
Rabobank has not provided Mr Tootell with any information as to what it intends to do with the farm or the security other than deposed to by Mr
Hernyk.
[73] I do not regard the first suggested aspect of oppression (the possibility of a substantial reduction of the debt through liquidation of assets) as rendering the adjudication application oppressive. Mr Tootell has not satisfied the Court that the entire judgment debt is likely to be extinguished within a reasonable time through realisation of securities. Rabobank’s desire to have the administration and investigation of a bankrupt estate commence now rather than later is reasonable.
[74] Equally, I do not regard it as oppressive that Mr Tootell alone faces what Mr Maassen refers to as “enforcement proceedings”. What Rabobank in fact seeks is Mr Tootell’s bankruptcy, partly because it desires an investigation into the circumstances in which Mr and Mrs Tootell dealt with their assets after Mr Tootell was rendered unable to properly manage the Tasmanian operation. Mr Tootell is taken to have known when he entered his guarantee obligations that he was accepting joint and several obligations. The circumstances of individual guarantors may vary substantially. It is not oppressive that Rabobank focuses in the present proceeding upon Mr Tootell and his estate.
[75] Mr Maassen’s complaint as to an inadequacy of information from Rabobank as to its intentions with regard to the farm and the security might assume significance if Mr Tootell had satisfied the Court that there appears to be sufficient value in the security to cover his judgment debt. He has not done so.
Bringing all factors relevant to the discretion together
[76] Having regard to the various matters raised by Mr Maassen for Mr Tootell, I stand back and consider all the circumstances relating to Mr Tootell’s situation. I am not satisfied either that it is just and equitable or that there is any other sufficient reason to not adjudicate Mr Tootell bankrupt. In particular, justice and equity require a balancing of the interests of the debtor against those of the creditors. There would be an injustice to the creditors were I not to adjudicate Mr Tootell bankrupt.
[77] I reach this conclusion with some sympathy for the position in which Mr Tootell now stands. His insolvency arises from a single commercial venture which has failed partly because of Mr Tootell’s intervening illness and partly because of the failure of others involved in the enterprise to take the reins. But the failure has been on a large scale. The recovery for the creditor from its securities has been complicated and almost certainly prejudicially affected by the failure of those involved with the enterprise to protect its assets and value while they were still in legal control. A substantial shortfall on recovery appears probable. The public interest requires that, in relation to Mr Tootell’s undisputed insolvency, his creditors obtain the clarity and possible benefit that may flow from the investigation which the Official Assignee will conduct upon Mr Tootell’s adjudication in bankruptcy.
[78] This judgment cannot contain findings as to whether or not Mr Tootell’s s 21 agreement with his wife will ultimately prove to be valid or invalid. That matter, along with the usual enquiries into Mr Tootell’s asset and liability position, now passes to the Assignee for examination.
Orders
[79] I order:
The debtor’s application for an order staying this proceeding is
refused;
The debtor is adjudicated bankrupt;
The debtor is to pay to the creditor the costs of the creditor’s
application on a 2B basis together with disbursements to be fixed by the Registrar;
This order is timed at 12.30 pm today.
Solicitors:
JT Law, Wellington for Judgment Creditor
Cooper Rapley Lawyers, Palmerston North for Judgment Debtor
Associate Judge Osborne
SCHEDULE A
KJ$idJLTOOTEtc
ASSETS oWNED
asst3l MAY2010
Equity as per Fihailcimi Statements 3405MB
3 L feotell
— Form Aesets livestock etc 30000Q
tsxua 62000
Unit B404 at Market Value 450000
PEG Shares - Ri Tootell 50000
SC She a J LToLet 20000
HoJdeWHoIdlnbs Limited J TooteD (600 shares 50%, toat Value $300K) 150000
ASS 50 Asocunt- J L Tootéli name - ex,i & I Trust 26b000
Loan to Tootell TRial tori L Tootell (272364)
TOtAL JOINI ASSETS 4433955
1/2 share 2218978
RJT0QtL1.
Austraflan rein 4650983
Sank Debt - rorAusele advances . (1260000) Bank Overdrsfl (201238)
Transfer polilon to J L Tootall to balanca ocjulty to 50/SO (982769
2218976
SI. TOOTELL
PEG Shares - Currently R.J - xer via Matrimonial Agreement Boono
|
.1 L Shares already 20ODD
Holdolt HoldInUs Ltd- Currently B I - xIer via Matrimonial Abreernerit 150000
Accounts Receivable 1092
(38T Payable (33689)
SIC (8603).
Share of Australian Fain to balance to 50(50 982769
I Tooteil - Fari Assets liveclock etc 300000
Lexus 62000
Tootell Trust Loan Account (161865)
NapferUnhl@BV CostP5SK 398611
Unft B404 - at Mqket Value 45000ó
ASS 50 Account
I L Tootell nèma - alt I & I Trus 209000
Loan to TooLeN R-ust for I L Tootsil. (2fl364)
2218917
4433955
Matrlmonlel transfers Reautred
50000
150000
40