Scott

[2021] NZHC 518

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-414

[2021] NZHC 518

IN THE MATTER

of an application for approval of a creditors’ proposal under Part 5 of the Insolvency Act 2006

AND

BETWEEN

the joint proposal of SIMON FRANCIS SCOTT and LEONE MARGARET SCOTT

Applicants

Hearing:	11 March 2021 (and on the papers)
Appearances:	No appearances
Judgment:	15 March 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 15 March 2021 at 4pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 15 March 2021

RE SCOTT [2021] NZHC 518 [15 March 2021]

[1]    This is an application by Mr and Mrs Scott for approval of a creditors’ proposal under pt 5 of the Insolvency Act 2006 (the Act).

[2]    It will be immediately apparent this is a joint proposal. Insolvency Law and Practice states with an insolvency proposal can only relate to one insolvent.1 In my judgment, Edmonds v ASB Bank Ltd, I said:2

As to the Proposal being a joint Proposal, at the risk of stretching a point, I am prepared to consider the Proposal on that basis, but again without creating an authority for that occurring in the future. The alternative is to dismiss the application and require the insolvents to incur further costs in starting afresh. The creditors were content to accept the Proposal on the basis that it was put and given the Proposal otherwise complies with the Act and is for the benefit of the creditors …

In that case, I considered it appropriate to allow the proposal.

[3]    I raised this issue with counsel for the applicants who referred to the decision of Sinclair J in Re Shaxon, where his Honour approved a joint proposal – albeit without discussion on the point.3

[4]    Where a joint proposal is intended, there are normally two mirror proposals, each conditional upon the other being approved.

[5]    In this case, as no creditor has taken steps to oppose the approval of the proposal, and all creditors were notified of the proposal (from which it is apparent what is proposed in a joint proposal), I adopt a similar approach to that set out in [2] above.

Background

[6]    The proposal was filed with the Court on 7 September 2020. An affidavit of Mr and Mrs Scott filed in support of the proposal recorded debt and liabilities to creditors  of  just   over   $1.446   million.   A   creditors’  meeting   was   held   on 22 October 2020, but adjourned because a claim was received at that meeting from

1      Stephen Revell and John Walsh (eds) Insolvency Law and Practice (online ed, Thomson Reuters) at [IN333.02A], citing Re Chard [1985] 2 NZLR 612 (HC).

2      Edmonds v ASB Bank Ltd [2020] NZHC 496 at [12].

3      Re Shaxon HC Auckland 8454/88, 25 July 1988.

a creditor for over $600,000 relating to unpaid rent on commercial premises that had been guaranteed by the insolvents.

[7]    The meeting was adjourned to 5 November 2020 to allow an amended proposal to  be  presented.     The  result  was  that  the   proposal  that  went  to   a  vote  on   5 November 2020 was more advantageous than that contained in the original proposal. The original proposal contemplated a  payment  to  creditors  of  approximately  eight cents in the dollar. By the time of the 5 November 2020 meeting, with some creditors reducing their claims and allowing for the appearance of the new creditor, the total value owed to creditors was just over $978,000.

[8]    The original proposal saw $100,000 being made available from the insolvents’ family trust and the sum of $25,000 being paid by them over time. By the time of the adjourned meeting on 5 November 2020, the amount that was being paid over time increased to $75,000 meaning, if approved, that the proposal ultimately voted on would return approximately 18 cents in the dollar to creditors.

[9]    At the creditors’ meeting, 11 out  of  the  13  creditors  voted  in  favour  of the proposal. In terms of the value of their proven claims, more than 75 per cent of the creditors who voted supported the proposal, with $731,002.96 in favour and

$182,962.85 against.

Service

[10]   While detail of the service of the original proposal has been provided, the proposal does not provide details of the presentation of the amended proposal. However, I accept counsel’s assurance, as set out in the memorandum filed in support of this application, that the amended proposal was presented. In any event, it was of significantly more benefit to the creditors than the original proposal so, even if there was some omission in that regard, I would not have considered it material.

[11]   The application for approval was duly filed in the Court and was for first call on 25 February 2021. The matter was adjourned to 11 March 2021 for proof of compliance with s 333(1) of the Act which 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.

[12]   From the material filed, it appeared that notice of the hearing of the application for approval had only been given to those creditors who voted.

[13]   Further material has now been filed that satisfies me that all creditors accepted by the trustee as creditors of the insolvents were given notice of this application. I note there were a number of creditors originally listed in the proposal who turned out to be creditors of the insolvents’ company rather than personal creditors and who played no part in the proposal. None of the creditors served after the first call of this application have taken any steps to oppose the proposal.

Satisfaction of requirements of the Act

[14]Section 327 of the Act requires:

(1)The proposal must be—

(a)in the prescribed form; and

(b)accompanied by a statement of affairs that is in the prescribed form and verified by affidavit.

[15]   I am satisfied that the proposal, as filed, meets the requirements of the Act.    I am further satisfied that the requirements of ss 330 and 331 were met, that is, the requirement for the trustee to hold a meeting of creditors and for the meeting to be conducted in accordance with s 331 of the Act.

[16]   The third stage of the process in a creditors’ proposal is to apply to the Court for approval of the proposal under s 333 of the Act. In order for the proposal to be approved, I have to be satisfied as to the reasonableness of the proposal and its expediency as per s 333(3).

[17]   While the Court has the discretion to refuse approval, it should only do so if one or more of the trigger paragraphs in s 333(3) applies. The approach normally taken to proposals is that set out by Hardie Boys J in Re Bennetts4 which was subsequently quoted with approval in Farmer v Rowley:5

I think the Court should accept the view of the creditors, or the majority of them, and grant approval unless it is apparent that one of the grounds for refusing approval exists.

[18]   Having reviewed the proposal, I am satisfied that none of the grounds for refusing approval exists. The statutory requirements as to the form and contents of the proposal have been met, as were the requirements for the running of the creditors’ meeting.

[19]   I consider the proposal to pay 18 cents in the dollar, albeit that part of the payment is over time, a reasonable one calculated to benefit the general body of creditors. While two creditors voted against the proposal, they have not taken steps to formally oppose its approval.

[20]   Standing back and looking at the proposal in its entirety, I can find nothing that adversely impacts on the exercise of my discretion and, as a result, the application for approval of the proposal is granted.

Associate Judge Lester

Solicitors:
Young Hunter, Christchurch

4      Re Bennetts HC Christchurch B138/81, 1 February 1982 at 9.

5      Farmer v Rowley [1992] 2 NZLR 195 (CA) at 205. See also Herbert v New Zealand Guardian Trust Co Ltd [2012] NZCA 442 at [27].