Rezende v American Express International (NZ) Inc
[2025] NZHC 262
•21 February 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-001778
[2025] NZHC 262
UNDER the Insolvency Act 2006 BETWEEN
ALBERTO MENDES MONTEIRO REZENDE
Insolvent
AND
AMERICAN EXPRESS INTERNATIONAL (NZ) INC
ANZ BANK NEW ZEALAND LIMITED DEBTMANAGERS LIMITED
BANK OF NEW ZEALAND FINANCE
NOW LIMITED (trading as Purple Visa) HEARTLAND BANK LIMITED INLAND REVENUE
LATITUDE FINANCIAL SERVICES LIMITED
NISSAN FINANCIAL SERVICES NEW ZEALAND PTY LIMITED
Creditors
Hearing: 20 February 2025 Appearances:
E T M Mulrennan for the Insolvent
Judgment:
21 February 2025
JUDGMENT OF ASSOCIATE JUDGE COGSWELL
REZENDE v AMERICAN EXPRESS INTERNATIONAL (NZ) INC [2025] NZHC 262 [21 February 2025]
This judgment was delivered by me on 21 February 2025 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Introduction
[1] The provisional trustee, Christine Liggins, seeks orders that the Court approve a Proposal to the Creditors of Alberto Mendes Monteiro Rezende (the Insolvent), dated 8 June 2024 (Proposal), made under Pt 5, Sub-pt 2 of the Insolvency Act 2006 (Act).
[2] Applying to the Court for approval of the Proposal is the final stage in the process allowing an insolvent to avoid bankruptcy by making a proposal to creditors for the payment or satisfaction of the insolvent’s debts.1
[3] When the application was called, there was no appearance on behalf of any creditor or otherwise objecting to the Proposal.
[4]Having heard from counsel for the provisional trustee, I approve the Proposal.
Proposal process and approval by the Court
[5] The first stage in seeking the Court’s approval is for a proposal to be filed satisfying the requirements of s 327 of the Act. This includes nominating a trustee for collection and distribution of instalments paid. This person is the provisional trustee until the proposal is approved.
[6] The second stage is for the provisional trustee to call a meeting of the insolvent’s creditors pursuant to s 330 of the Act and for the passing of a resolution accepting the proposal by a majority of the creditors in number and three quarters in value of the creditors who vote.
1 Insolvency Act 2006, s 326; and as contained in sub-pt 2 of pt 5 of the Act.
[7] The trustee must then apply to the Court for approval of the proposal and send notice of the hearing of the application in the prescribed form to the insolvent and every known creditor.
[8]Section 333 of the Act provides:
333 Court must approve Proposal
(1)After the proposal has been accepted by the creditors, the trustee must, as soon as practicable,—
(a)apply to the court for approval of the proposal; and
(b)send notice of the hearing of the application in the prescribed form to the insolvent and to each known creditor.
(2)The court must, before approving a proposal, hear any objection that is made by or on behalf of a creditor.
(3)The court may refuse to approve the proposal if it considers that—
(a)the provisions of this subpart have not been complied with; or
(b)the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors; or
(c)for any reason it is not expedient that the proposal be approved.
(4)The court must not approve a proposal if it does not provide for the payment, before any other debts are paid, of—
(a)those debts that would have priority under this Act if the insolvent was adjudicated bankrupt; and
(b)the trustee’s fees and expenses that are properly incurred by the trustee in respect of the proposal; and
(c)costs incurred by a person other than the insolvent in organising and conducting a meeting of creditors for the purpose of voting on a proposal.
(5)Subsection (4)(a) does not apply to the extent that a creditor waives the priority that the debt of that person would otherwise have had.
(6)When it approves the proposal, the court may correct any formal or accidental error or omission, but must not alter the substance of the proposal.
[9] From the use of the words “may” and “must” in ss 333(3) and (4), the Court retains a discretion whether to refuse to approve a proposal in the circumstances set
out in s 333(3), whereas the Court’s refusal is mandatory in the circumstances set out in s 333(4).
[10] The first discretionary requirement, s 333(3)(a), is to consider whether the requirements of subpart 2 of the Act have been complied with. I do so below.
[11] In terms of the second of the discretionary circumstances in s 333(3)(b), whether the Proposal is reasonable, this is to be assessed objectively from the perspective of the “commercially experienced prudent creditor”.2
[12] In Herbert v New Zealand Guardian Trust Co Ltd the Court of Appeal held that when considering reasonableness, the Court is required to exercise its independent judgment but that it must be influenced by the commercial judgment of creditors.3 The Court held that unless there are special public interest or other commercial considerations present, the assessment of the general body of creditors ought to be accepted.
[13] The third discretionary basis is whether there is any reason why it is not expedient that the Proposal be approved.4 As Asher J explained in Kelly v Structured Finance Ltd:5
The word “expedient” is capable of a broad meaning. It can mean “practicable”, but also has the wider meaning of “suitable” or “appropriate”.
… I consider that s 333(3)(c) requires an open-ended approach, and that any attempt to focus it on a specific matter would be to impose a limitation that does not arise from the words of the subsection.
[14] Section 333(4) requires the Court to refuse the Proposal if the Proposal does not provide for the payment before other debts are paid of:
(a)debts that would be preferential in a bankruptcy;
(b)the trustee’s fees and expenses properly incurred by the trustee in respect of the Proposal; and
2 Kelly v Structured Finance Ltd [2009] 2 NZLR 785 (HC) at [45] approved by the Court of Appeal in Magsons Hardware Ltd t/a Mitre 10 Mega v Bogiatto [2011] NZCA 378 at [29].
3 Herbert v New Zealand Guardian Trust Co Ltd [2012] NZCA 442.
4 Insolvency Act 2006, s 333(3)(c).
5 Kelly v Structured Finance Ltd, above n 2, at [53].
(c)the costs of any other person other than the insolvent in relation to the meeting of creditors.
Relevant background to the Proposal
[15] The impact of the COVID-19 pandemic had an adverse financial effect on the Insolvent’s affairs. He was a travel consultant, but had to transition between jobs, holding several different jobs at once. This, in addition to serious health challenges that he faced at that time, led to an inability to meet his financial commitments.
[16] He has taken pro-active steps to reduce expenses, and has sought the advice of DebtFix, a debt management firm, to assist with managing his current financial issues.
[17] Ms Liggins, a director of DebtFix and a licensed insolvency practitioner, has agreed to be his trustee.
[18] The Proposal is dated 8 June 2024 and was filed together the Insolvent’s sworn statement of affairs and affidavit.
[19] The provisional trustee gave notice of the creditor’s meeting to all known creditors of the Insolvent.
[20] The creditor’s meeting set for 1 August 2024 was adjourned several times consequent on amendments to the Proposal and to give the Insolvent’s creditors time to consider the amended Proposal.
[21] Ultimately the meeting of creditors was held on 17 October 2024. No creditors attended in person.
[22] The Insolvent has seven unsecured creditors owing $158,175.05, and two secured creditors owed $28,253.00. He has no preferential creditors.
[23] Under the terms of the Proposal, the Insolvent will pay $600 per week for five years to the Trustee, resulting in the unsecured creditors receiving repayment of
almost 100 cents in the dollar. He will not enter into any further borrowing, or increase to existing borrowing, during the term of the Proposal.
[24] The Proposal provides that the fees and the expenses of the trustee will be paid as follows:
(a)$1,000 in expenses;
(b)20 per cent of the first $3,000;
(c)10 per cent of the following $7,000; and
(d)five per cent in excess of $10,000.
[25] The Proposal was accepted via postal vote by five of the Insolvent’s seven unsecured creditors. Those creditors all voted in favour of the Proposal.
[26]No creditors opposed the Proposal.
[27] The secured creditors did not vote. They will continue to receive payment direct from the Insolvent.
[28] The result of the creditor’s meeting was that the Proposal was accepted by a majority in number of creditors and three-quarters in value of the creditors who voted as per s 331 of the Act. The Proposal was, therefore, carried.
[29]The provisional trustee provided her report to the Court on 18 November 2024.
[30]The report addresses the requirements of the Act as they relate to the Proposal.
[31] The report concludes that the Insolvent will repay his creditors almost 100 cents in the dollar, less the costs being paid to the trustee under the Proposal, and says that this is more advantageous to the creditors than would be achieved through any alternative method, including bankruptcy.
Have the requirements of Sub-pt 2 been complied with?
[32] The provisional trustee confirms in her 18 November 2024 report that notice of the Proposal was given to all known creditors of the Insolvent that a meeting of creditors would be held and when that meeting would take place. She details the reasons for and dates of the adjourned meetings and says that all creditors were given notice of the adjourned creditors’ meeting date of 17 October 2024.
[33] Section 331(3) of the Act sets out the requirements for acceptance of a proposal at the creditors’ meeting, providing:
(3)The resolution accepting the proposal must be decided by a majority in number and three quarters in value of the creditors who—
(a)vote; and
(b)are personally present or are represented at the meeting by a person specified in s 332 or have voted by postal vote.
[34] These thresholds therefore only relate to those creditors voting. The resolution of creditors accepting the Proposal was therefore decided by the required majority in number of those voting and over three quarters in value, satisfying the requirements of the Act.
[35] The Proposal sets out the trustee’s fees and expenses (as set out above) as required by s 327 of the Act and Form B9 of the High Court Rules 2016. They are in accordance with reg 40 of the Insolvency (Personal Insolvency) Regulations 2007.
[36] In addition, an affidavit has been filed confirming that all known creditors of the Insolvent were advised of the hearing date for the application to the Court for approval of the Proposal.
[37] I am satisfied that the procedural requirements under sub-pt 2 of pt 5 have been complied with.
Is the Proposal reasonable under s 333(3)(b)?
[38] The provisional trustee’s report to the Court dated 18 November 2024 advises that in her opinion the insolvent’s assets total $42,000, his unsecured creditors total
$158,175.05, and his secured creditors total $22,390.35. His debts therefore considerably exceed the value of realisable assets in his possession.
[39] The provisional trustee confirms in her report that the payments by the Insolvent will be made from his salary. She sets out that she has worked with the Insolvent to assist with budget and income and that she considers the budget prepared as both realistic and sustainable and sufficient to maintain the payments set out in the Proposal.
[40] The requisite majority of voting creditors by number and value have voted in favour of the Proposal and there are no apparent public interest or other commercial considerations that ought to prevent the assessment of the general body of creditors being accepted (as held in Herbert).6
[41] I consider that the Proposal is reasonable and calculated to benefit the general body of creditors, who will receive almost full repayment of their debts after five years.
Is there any reason that it is not expedient for the Proposal to be approved?
[42] I do not consider that there is anything in the application to suggest that it would not be expedient for the Proposal to be approved.
Section 333(4) matters
[43] In terms of s 333(4) matters, in this case there are no preferential debts, and the Proposal provides that the trustee’s fees and expenses will be paid. The provisional trustee organised the meeting of creditors to approve the Proposal and does not claim any separate costs. None of the matters for which the Act mandates refusal therefore prevent approval of this Proposal.
6 Herbert v New Zealand Guardian Trust Co Ltd, above n 3.
Conclusion
[44]I am satisfied that:
(a)the provisions of Sub-pt 2 of Pt 5 of the Act have been complied with;
(b)the terms of the Proposal are reasonable and calculated to benefit the general body of the creditors;
(c)it is expedient that the Proposal be approved; and
(d)there are no grounds under s 333(4) of the Act which mandate against approval of the Proposal.
Result
[45] For the reasons set out above, I approve the Proposal of Alberto Mendes Monteiro Rezende dated 8 June 2024 pursuant to s 333 of the Insolvency Act.
Associate Judge Cogswell
Solicitors:
Lane Neave, Auckland
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