Shaheed v ASB Bank Limited

[2023] NZHC 2823

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-1261

[2023] NZHC 2823

UNDER

the Insolvency Act 1993

BETWEEN

MOHAMMED SHAHEER SHARIYAD SHAHEED

Insolvent

AND

ASB BANK LIMITED

WESTPAC BANINKING CORPORATION

Creditors

Hearing:	5 October 2023
Appearances:	J A Woolerton for the Trustee
Judgment:	9 October 2023

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 9 September 2023 at 3.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:
Webster Malcolm Law, Warkworth

SHAHEED v ASB BANK LIMITED [2023] NZHC 2823 [9 October 2023]

[1]                 The insolvent, Mohammed Shaheer Shariyad Shaheed (Mr Shaheed) applies under s 333 of the Insolvency Act  2006  (the Act) for  approval  of a proposal  to  Mr Shaheed’s creditors for the payment or satisfaction of his debts.

[2]                 The proposal is comprised in an amended proposal dated 15 November 2022. The insolvent proposes making 78 fortnightly payments of $430 to his trustee, to be distributed to his unsecured creditors by monthly pro-rata payments. The amended proposal is attached to this judgment as schedule A.

[3]                 Section 333 is the third stage of a three-stage process for putting a proposal into effect:

(a)the first stage, under s 328 of the Act, is that a proposal satisfying the requirements of s 327 of the Act must be filed in Court;

(b)the second stage is a meeting of the insolvent’s creditors under s 330 of the Act, and the passing of a resolution by a majority of the creditors accepting the proposal. The resolution must be passed by a majority in number and three-quarters in value of the creditors who vote. Postal votes are permitted;

(c)finally, the Court’s approval must be obtained.

[4]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.

[5]                 There are mandatory requirements for a proposal under s 333(4). The provisional trustee’s report confirms that those requirements are met in this case.

[6]                 Under s 333(3)(a), the Court may refuse to approve a proposal if the provisions of subpart 2 of pt 5 of the Act have not been complied with. I discuss these procedural requirements below.

[7]                 In Herbert v New Zealand Guardian Trust Co Ltd & Ors,1 the Court of Appeal held that the Court is required to exercise its independent judgment in determining what is reasonable, but the Court must be influenced by the commercial judgment of creditors. The assessment of the substantial body of creditors ought to be accepted, unless there is special public interest or other commercial considerations present.

[8]                 The final question for the Court pursuant to s 333(3) is whether there is any reason why it is not expedient to approve the proposal. As Asher J explained in Kelly v Structured Finance:2

… the word “expedient” is capable of a broad meaning. It can mean “practicable”, it 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 it does not arise from the words of the subsection.

1      Herbert v New Zealand Guardian Trust Co Ltd [2012] NZCA 442.

2      Kelly v Structured Finance, [2009] 2 NZLR 785 (HC) at [53].

[9]The insolvent has verified that he has two unsecured creditors:

(a)ASB Bank Limited - $33,645.24;

(b)Westpac Banking Corporation - $2,531.78.

[10]             The insolvent has verified that he has one secured creditor, Oxford Finance limited, for $8,600, secured against the insolvent’s 2013 Lexus motor vehicle.

[11]             On 18 November 2022, the provisional trustee gave notice to the secured and unsecured creditors of a creditors’ meeting to be held on 15 December 2022, to vote on the amended proposal. No creditors attended the meeting in person,

[12]             The secured creditor has not lodged a proof of debt, and did not vote. Under the proposal, the insolvent will continue to make direct payments to the secured creditor pursuant to the contract between the secured creditor and the insolvent. The trustee will have no involvement in administering those payments.

[13]             ASB and Westpac filed proofs of debt and cast postal votes in favour of the amended proposal. Therefore, a resolution was passed in accordance with the Act.

[14]             The trustee’s report to the Court dated 4 July 2023 confirms her opinion that the assets of the insolvent have a total value of $32,000, including the Lexus motor vehicle secured to Oxford Finance Ltd.

[15]             The total amount of the payments to be paid by the insolvent under the proposal is $33,540. After deduction of the trustee’s costs and expenses, there will be $30,113 available for distribution to the unsecured creditors, resulting in a distribution of approximately 90 percent of the total of the unsecured debts.

[16]             The payments by the insolvent will be made from his salary, which the provisional trustee has confirmed to be $36,500 net per annum, which equals

$1,403.85 net per fortnight before deduction of the $430 pursuant to the proposal.

[17]I am satisfied that:

(a)the provisions of the Act have been complied with.

(b)there are no grounds under s 333(4) which mandate against approval of the amended proposal;

(c)the terms of the proposal are reasonable, and calculated to benefit the general body of the creditors; and

(d)it is expedient that the proposal be approved.

[18]Accordingly, the amended proposal attached as schedule A is approved.

Associate Judge Brittain