Sovereign Services Limited v Wilson

[2013] NZHC 2883

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-986 [2013] NZHC 2883

BETWEEN  SOVEREIGN SERVICES LIMITED Judgment Creditor

ANDPHILIP MUNRO WILSON Judgment Debtor

Hearing:                   1 October 2013

Appearances:           E C Gellert and TK Cunningham-Adams for judgment creditor

P D Sills for judgment debtor

Judgment:                31 October 2013

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on Thursday 31 October at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Simpson Grierson, Auckland

Hornabrook Macdonald, Auckland

Counsel:

P D Sills, Auckland

SOVEREIGN SERVICES LIMITED v WILSON [2013] NZHC 2883 [31 October 2013]

[1]      Sovereign Services Ltd (Sovereign) has a judgment against Philip Munro Wilson (Mr Wilson) for the sum of $397,897.46.   Most of that judgment remains unpaid.  Sovereign has applied for an order adjudicating Mr Wilson bankrupt, after he failed to comply with a bankruptcy notice demanding payment of the judgment.

[2]      Mr Wilson accepts that he owes and cannot pay the balance of the judgment debt, and that he is also substantially indebted to other creditors (the larger ones being family or a friend).  He says that his insolvent position is entirely due to the collapse of a third party finance company, Guaranteed Finance Limited (GFL).  The judgment debt comprises commissions paid to him by Sovereign for brokering insurance policies for GFL (on the lives of its customers).  The commissions were clawed back after GFL’s business collapsed and it could no longer pay the premiums, and the policies were cancelled.

[3]      Mr Wilson says that it would be just and equitable to decline to make an order for adjudication because the circumstances of cancellation (and hence claw- back) were out of his control, and because he has put a proposal to Sovereign which, if accepted, would result in the debt being repaid in full over time.

[4]      One other creditor, ASB Bank Ltd, has filed notice of appearance in support of Sovereign’s application.   Three other creditors (comprising family and a friend who have assisted Mr Wilson financially in his attempts to extricate himself from his financial difficulties) do not support adjudication.   They prefer that Mr Wilson be allowed to continue to work in the financial services industry so as to put himself in a position to repay his debt to them.

[5]      There is no issue that Sovereign has established a prima facie case for an order for adjudication.  The question for determination by the Court is whether Mr Wilson has established that it would be just and equitable not to adjudicate him bankrupt. This largely turns on whether there is a public interest in his adjudication.

Background

[6]      From  about  the  year  2000,  Mr Wilson  has  worked  as  an  insurance  and mortgage broker.   Initially he worked for a brokerage company, but in 2006 he started his own brokerage business, which he operated through a company, PMW Finance Ltd.

[7]      When he was working for the other brokerage company, Mr Wilson had advised on and sold insurance and mortgage products on behalf of Sovereign.  He continued to do so after setting up on his own, both by utilising his own contacts and by purchasing a portfolio of clients from another financial broker.  As part of setting up this business he signed a financial advisor agreement with Sovereign.   Initially (through the property boom years 2006 and 2007) the mortgage business was the more active part of the business, but after the property market slumped in early 2008, the insurance side of the business became more important.

[8]      In  mid  2008,  he  entered  into  further  agency  agreements  with  two  other insurance companies, under which he marketed insurance products only.

[9]      In early 2009 Mr Wilson started brokering insurance policies covering the lives of clients of a small finance company, Guaranteed Finance Ltd (GFL).  He says he did so after GFL’s  director  and shareholder, Andrea Baker,  approached him, saying that she wanted GFL to take out policies on the lives of its borrowers, in order to protect itself against the risk of non-payment of loans if the borrowers died.

[10]     Mr  Wilson  came  to  an  arrangement  with  GFL under  which  Mr  Wilson submitted to one of the three insurance companies for whom he held an agency applications for cover on the lives of GFL’s clients.   GFL dealt directly with its clients in the soliciting and preparation of the applications.  It is not clear from the evidence whether Mr Wilson had any contact with GFL’s clients, or any part in the preparation of the applications, prior to submitting them to Sovereign.  He says only that he had contact with some of them subsequently, when Sovereign requested more information, for example on medical matters.  Mr Wilson paid approximately 70 per cent of the commissions he received for brokering these policies to GFL, to cover

their administrative costs and the costs of its sales staff who “carried out the leg work”.

[11]     GFL was  named  as  the  owner  of  the  policies,  and  was  responsible  for payment of the premiums.   However, rather unusually, Mr Wilson guaranteed the premium payments.  He contends that this was to allow him to monitor the payments (a somewhat surprising way of doing so).

[12]     Mr Wilson says that he discussed this arrangement, including his arrangement to pay part of the commission to GFL for its work in preparing applications, with the business development manager for Sovereign with whom he dealt, Mr Andrew Scott. Mr  Wilson  also  says  that  the  policies  placed  for  GFL  accounted  for  a  large proportion of his business, and that Sovereign was aware of this.   He says that initially Sovereign had concern about the risk involved in having one policy owner and one premium payer for a large number of policies, but that it eventually agreed to the arrangement.  Sovereign has not disputed Mr Wilson’s evidence that he had discussed these matters with Mr Scott.

[13]     In   late   2009   Sovereign   identified   concerning   patterns   in   insurance applications submitted to it by Mr Wilson, particularly those relating to GFL.   It undertook an internal investigation into the applications over the following year.  As a result of that investigation it formed the view that there were serious issues about the applications and filed a complaint with the police against both Mr Wilson and GFL’s director, Ms Baker.  Sovereign does not know whether the police have taken any steps in relation to that complaint.

[14]     GFL was experiencing financial difficulties by early 2010.  It started missing premium payments and cancelled some of its policies.  In April 2010 Sovereign and the other two insurance companies started to claw-back commission that had been paid on policies that were in default or had been cancelled.   All three companies made demand for claw-back commission in the middle of 2010.  Mr Wilson says that the total amount claimed by all three was approximately $970,000.

[15]     Sovereign made demand on Mr Wilson in July 2010 for $329,393.18, being the debit balance at that point in his commission account.   Mr Wilson responded, seeking a breakdown of the sum claimed. He contended that his company PMW Finance Ltd owed the debt, but made it clear that neither PMW Finance Ltd nor he was in a position to pay the sum demanded, and that on-going commissions on renewal of existing policies or mortgages (referred to as “trail commission”) was the only source of repayment.  He put a proposal to Sovereign that the loan book be sold and the resulting funds (after clearing a smaller debt secured over the loan book) be distributed pro rata to the three insurance companies in settlement of all claims.

[16]     On 5 August 2010 Sovereign cancelled its agency agreement with Mr Wilson, and on 23 August 2010 Sovereign’s solicitors provided a breakdown of the debit balance in the commission account (then standing at $389,660.86). The solicitors pointed out that the agency agreement was with Mr Wilson rather than his company, and  advised  that  the  proposal  for  settlement  was  unsatisfactory  and  therefore rejected.  Since that date Sovereign has withheld payment of “trail commission” that would have been due to Mr Wilson on ongoing policies but for the debit balance in the commission account, and has applied that commission in reduction of the debit balance.

[17]     On 20 October 2010 GFL was placed in liquidation by resolution of its shareholder.    The  liquidator  subsequently  identified  the  primary  cause  for  the collapse as a client base of borrowers with poor credit combined with the high cost of administration and high default rate.1

[18]     All  three  insurance  companies  commenced  recovery  proceedings.     Mr Wilson’s counsel wrote to them all inviting discussions in light of Mr Wilson’s inability  to  pay.     Sovereign  responded  that  there  was  “no  real  prospect  of settlement”.  Mr Wilson has continued to seek a settlement with Sovereign, based on Sovereign retaining the trail commissions, but the proposals have remained unacceptable to Sovereign.

[19]     Sovereign obtained its judgment against Mr Wilson on 10 December 2012. The  Court  rejected  Mr  Wilson’s  argument  that  his  company  owed  the  debt. Judgment  was  given  for  the  debit  balance  in  Mr Wilson’s  commission  account (taking into account trail commissions retained by Sovereign), interest and costs. Sovereign served a bankruptcy notice on Mr Wilson on 12 March 2013, and filed the present application on 2 July 2013.

[20]     Since judgment was entered, Mr Wilson has invited Sovereign to accept his proposal that the judgment debt be repaid by crediting trail commissions.   He estimates that this would clear the debt within 10 years (a contention that Sovereign disputes, pointing to a fall-off in the commission due to cancellation of policies).

[21]     Mr Wilson has settled the claims for claw-back commission made by the other two insurance companies (he has not disclosed the terms of settlement, saying that they are confidential).  It is not in dispute that he did so with the assistance of loans from his parents, his ex-wife’s trust, and a family friend (the director of the company that currently employs him).   These persons have all filed affidavits, in which they have said that they support the proposal that Sovereign continue to retain Mr Wilson’s trail commissions and apply them in payment of the judgment debt. They all oppose adjudication on the ground that they want Mr Wilson to continue to work, so that he has the opportunity to repay them also (their debts total slightly in excess of $260,000).

Legal principles

[22]     The legal principles that the Court applies when determining an application for adjudication are not in dispute:

(a)      a creditor may apply for a debtor to be adjudicated bankrupt if the debtor owes the creditor $1,000 or more, the debt is for a certain amount and is payable either immediately or at a certain future date, and the debtor has committed an act of bankruptcy.2

(b)a debtor commits an act of bankruptcy if a creditor has obtained a final judgment, execution of the judgment has not been halted, and the debtor has not complied with the bankruptcy notice within the prescribed time limited.3

(c)      Once  the  statutory  pre-requisites  are  satisfied,  the  Court  has  an unfettered discretion to adjudicate the debtor bankrupt.4

(d)Allied to the discretion to adjudicate the debtor bankrupt, the Court also has a discretion to refuse to do so if:5

(i)the creditor has not established the statutory pre-requisites (in s 13 of the Act); or

(ii)      the debtor is able to pay his or her debts; or

(iii)it is just and equitable that the Court not make an order of adjudication; or

(iv)     for any other reason an order should not be made.

[23]     The general principles that the Court applies when considering whether to exercise its discretion to refuse to adjudicate are well established.   They are conveniently summarised in the following propositions:6

(a)      A creditor who establishes the jurisdictional pre-requisites is not automatically entitled to an order.  Conversely, it is for an opposing

debtor to show why an order should not be made.7

3 Section 17.

4 Section 36.

5 Section 37.

6  Taken from the comprehensive summary by Faire AJ in Fontein v Bank of New Zealand HC Auckland  CIV-2009-404-7769, recently adopted  in  Smith  v  Trustees  Executors Ltd  [2013] NZHC 384 at [2]; see also the similar discussion of the principles by the Court of Appeal in its earlier decision in Baker v Westpac Banking Corporation CA 212/92, 13 July 1993.

7 See particularly McHardy v Wilkins & Davies Marinas Ltd (in receivership) CA 54/93, 7 April 1993 at 3.

(b)The  Court  will  consider  not  only  the  interests  of  those  directly concerned – the petitioner, other creditors, and the debtor – but also the wider public interest.8

(c)      The   wider   public   interest   requires   a   determination   whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public”.9

(d)The regard that the Court must have to public interest will transcend the interest of the immediate parties: the public interest in exposing and controlling an insolvent debtor exists independently of the interest of the debtor’s immediate creditors in collection of their debts.10

(e)      Absence of assets will be a factor in the exercise of the discretion, but undoubted absence of assets will not necessarily preclude an order, particularly where the circumstances are such that the debtor ought, in the public interest, to be visited with the disqualifications that go with bankruptcy.11

(f)      The potential for further investigation is another consideration, as the procedures available in bankruptcy for investigating the financial circumstances of the debtor may be more effective than investigation by other means.12

(g)The oppressive use of the bankruptcy procedure may be a ground for refusing an order.13

8At 3.

9 Re Nisbett, ex parte Vala [1934] GLR 553 (SC) at 556.

10 Re Fidow (a debtor) [1989] 2 NZLR 431 (HC) at 444; see also Re Circuitt, ex parte National Bank of New Zealand HC Napier B96/91, 27 May 1992, Re Guest, ex parte BNZ Finance Ltd [1991] 2

NZLR 477 (HC) and Re University of Tasmania, ex parte Zhang [2013] NZHC 275.

11 McHardy v Wilkins & Davies Marinas Ltd (in receivership), above n 7.
12 Re Fidow (a debtor), above n 10.

13 Baker v Westpac Banking Corporation, above n 6.

(h)The   Court   undertakes   a   balancing   exercise   in   relation   to considerations relevant to the case to determine whether the debtor has succeeded in showing an order ought not to be made.14

[24]     Other cases may be useful in identifying relevant factors for the discretion, but ultimately the discretion must be exercised on the facts of the particular case, having regard to what will be achieved by an order for adjudication.15

The opposing contentions

[25]     Sovereign’s starting point is that it has established the statutory prerequisites and is prima facie entitled to an order for adjudication as Mr Wilson is clearly insolvent.  It is not in dispute that he has no assets (apart from an entitlement to trail commissions).  Sovereign contends that Mr Wilson’s proposal to repay it from the trail commissions:

(a)       is contrary to Sovereign’s entitlement to be paid now;

(b)potentially allows for a preference of related creditors (whom he is proposing to pay out of income) and is tantamount to imposing an informal compromise on Sovereign which Mr Wilson could not achieve in a formal proposal under Part 5 of the Insolvency Act 2006;

(c)      is   wishful   and   unrealistic,   being   based   on   several   uncertain assumptions (as to the duration of policies and hence continuation of trail commissions).

[26]     Sovereign says that there is a public interest warranting adjudication so that Mr Wilson is precluded from incurring further debt or liabilities, or engaging in business and financial activities (he would be able to continue his employment with

his existing employer).

14 McHardy v Wilkins & Davies Marinas Ltd, above n 7, at 4.

15 Alexander v Bank of New Zealand [2012] NZHC 3288 at [7].

[27]     Mr Wilson says that an order for adjudication would not benefit creditors (including Sovereign), and will disadvantage creditors who are looking to be repaid out of his future income.  He initially took the position that there was no support for adjudication from any of Mr Wilson’s other creditors, but his counsel conceded in the hearing that his assumption that one creditor (ASB Bank) had decided not to pursue a  claim  could  not  be maintained  in  the  face of  a  notice of support  for Sovereign’s application filed at the start of the hearing by counsel for ASB Bank, who advised that it was intending to pursue its claim.  Mr Wilson also contends that there is no public interest in favour of adjudication: his debts are a consequence of the collapse of GFL, over which he had no control.  There is no suggestion that other assets will emerge from any investigation, and there is no evidence of misconduct to warrant a finding of absence of commercial morality or the need to protect the public from his future activities (his situation is a “one off” consequence of GFL’s demise).

[28]     In that context, Mr Wilson contends that it is just and equitable to decline an order for adjudication, because the facts show that Sovereign is acting unreasonably and vindictively:

(a)       Creditors will not benefit;

(b)      Mr Wilson’s  other  debts  are  manageable  (either  because  they  are

small or are to related parties who have agreed to give him time).

(c)      Sovereign has refused to engage with him in exploring the legitimate alternative that has been put to it (to pay over time from trail commission), which proposal is not unreasonable given that Sovereign’s business has many long running relationships.

(d)Sovereign’s arguments of public interest and commercial morality do not stand up to scrutiny.

(e)       To the contrary, the facts indicate that Sovereign has taken a dislike to

Mr Wilson based on an erroneous understanding of the circumstances

leading to the debt, and is pursuing its application to punish him or use him as a scape-goat.

[29]     I will deal with these differing contentions by considering the following factors:

(a)      Mr Wilson’s insolvency and availability of assets; (b)      The interests involved and Mr Wilson’s proposal; (c)      The public interest considerations;

(d)      Sovereign’s alleged oppressive conduct.

Mr Wilson’s insolvency and availability of assets

[30]     There can be no dispute that Mr Wilson is seriously insolvent.   He owes creditors in the order of $740,000, comprising the debt to Sovereign in respect of commissions being clawed back; the debts to his parents, ex-wife and a friend that were used to repay secured debts or to settle debts to other insurance companies; and two credit card debts which were used in part to clear other debts.  Further, interest is accruing on the debts at a significant amount per day, and Mr Wilson’s income from his current modest salary is barely able to keep up with accruing interest, let alone reduce the debt.  The only reduction in his indebtedness to date has been application of the trail commissions towards Sovereign’s debt, and as a result of borrowing (from family or friends) which appears to have done no more than switch liability from one creditor to another.

[31]     I accept that Mr Wilson’s only remaining asset is the entitlement to trail commissions, but the value and duration of those commissions is uncertain at best. Nevertheless, it is a relevant factor that these commissions currently are not being distributed   to   all   creditors   proportionally,   as   would   happen   following   an adjudication.

The interests involved/Mr Wilson’s proposal

[32]     One of the factors relied on by Mr Wilson is that he has the support of his parents, his ex-wife and the friend, all of whom have filed affidavits saying that they are opposed to adjudication because they want Mr Wilson to have opportunity to repay  the  debt  out  of  future  income.     Although  their  support  for  him  is commendable, it does not address important considerations such as what will happen if Mr Wilson’s income does not improve as he hopes or, conversely, if his income improves very substantially.   In the latter event (which has to be considered an ambitious goal given his current income) it is theoretically possible that he could clear the related debts (perhaps including interest) other than Sovereign’s debt, yet he is offering Sovereign no more than the trail commissions which may or may not ultimately clear Sovereign’s debt (including accrued interest); there is no evidence before the Court  to  show  clearly what  money will  become available  from  trail commissions, but it appears that there is a reducing flow.   A somewhat similar

proposal was rejected in Re University of Tasmania, ex parte Zhang,16  where the

Court saw the unequal treatment of unsecured creditors as being contrary to general business morality (as well as the principles of the Insolvency Act 2006).

[33]     Mr Wilson also says that the credit card debts are relatively small and he hopes to pay them out of income.  Again, that seems unlikely on his current income, and it may well be that ASB Bank in particular will want to pursue its debt (in the order of $30,000), raising yet again the question of whether it is just and equitable to decline adjudication where there is another creditor ready to seek substitution.

[34]     This brings me to Mr Wilson’s proposal to Sovereign.  I accept Sovereign’s submission  that  declining  adjudication  on  the  basis  of  the  proposal  to  allow Sovereign to retain the trail commissions is tantamount to imposing an informal compromise in circumstances where Mr Wilson would not be able to obtain the requisite majorities (particularly in relation to value of debt) for a formal proposal to

creditors under Part 5 of the Insolvency Act.

16 Re University of Tasmania, ex parte Zhang, above n 10 at [23].

[35]     Counsel for Mr Wilson submitted that all creditors, including Sovereign, would be worse off if an order for adjudication was made.  The related creditors, and the credit card providers, would lose the prospect of getting paid out of Mr Wilson’s future income, and Sovereign would lose the future trail commissions as well as face a claim for repayment of trail commissions received in the past two years (estimated to be in the order of $100,000).  As against that they would receive no more than a proportionate share of the trail commissions.

[36]     Sovereign has elected to proceed with its application with full knowledge of these potential consequences.  I am not persuaded that the prospects of recovery for other creditors are as rosy as Mr Wilson contends, and that they will necessarily be worse off by receiving only a proportionate share of the trail commissions.

[37]     Weighing the competing interests of the creditors, I consider that the fact that a formal creditors’ compromise could not be achieved is a factor against refusing an order for adjudication.   I will come back to consider Mr Wilson’s interests when considering the wider public interest.

Public interest considerations

[38]     Counsel for Mr Wilson acknowledged that the Court was required to take into account the wider public interest, but submitted that this was not a case where Mr Wilson had any control over the demise of GFL or had conducted himself in a way which warranted the sanction of bankruptcy either to promote commercial morality or protect the general public from Mr Wilson’s future business or financial dealings.

[39]     There  had  been  a  suggestion  in  the  evidence  put  forward  on  behalf  of Sovereign that GFL’s scheme for insuring its clients’ lives involved questionable business conduct. However, counsel for Mr Wilson submitted that there was simply no  evidential  basis  for  finding  that  Mr  Wilson  was  complicit  in  any  such questionable business practice.   I accept that the evidence does not justify such a finding (and indeed, counsel for Sovereign did not present its case on that basis).

[40]     However,  there  were  aspects  of  Mr Wilson’s  conduct  that  reflect  on  his

business and financial judgment:

(a)      He left the interviewing of GFL’s clients (the lives to be insured) to GFL, and did not independently address the risk involved in accepting the policies, except in some cases where Sovereign had requested further medical information.

(b)He accepted commissions knowing his continuing entitlement  was dependent on GFL paying premiums (one single policy holder for a number of policies) without enquiring into the underlying transactions and hence GFL’s viability.

(c)      He knew he was paying a large part of the commission received (70%) to GFL, and that he would have to meet that part of the commissions as well as the part that he retained, in the event that premiums were not kept up, policies were cancelled and commissions were clawed back.

(d)He ought to have appreciated that these arrangements carried a high risk in terms of potential liability to repay substantial amounts of commission, yet he made no particular provision for repayment in that event.

[41]     Counsel for Mr Wilson argued that this should not be regarded as a negative factor because Mr Wilson had informed Sovereign of the nature of his arrangement with GFL.  I do not regard it as an answer to questions about Mr Wilson’s judgment to say that Sovereign (a party with no contact with GFL) should have stopped its agent presenting this business.

[42]     Mr Wilson clearly saw this arrangement with GFL as a means of earning significant commissions, yet took no apparent steps to hedge his potential claw-back obligations.  Whilst I accept that he had no control over the collapse of GFL, he did have control over the business that he introduced to Sovereign and the steps that he took to address potential consequences if an apparently risky business did not succeed.  I regard this as a factor counting against refusal of adjudication.

[43]     It is significant that one of the major reasons advanced by Mr Wilson for asking the Court to refuse to adjudicate him bankrupt is that he wishes to continue work as a registered financial advisor (perhaps handling clients’ money). Although I have accepted that there is no evidence to link him to any unacceptable business practices on the part of GFL, I have concern about the judgment that allowed him to enter into the arrangement with GFL.   I consider that that has led directly to his present indebtedness.  He is now wanting his creditors to carry part of the burden (and perhaps a substantial part) of rehabilitating himself.  His counsel submitted that he would not put himself back into that position.  Although I have no doubt that his current predicament has had lessons for him, I am not persuaded that that means he should be excused any further sanction, or that the errors of judgment I have identified will not be repeated in some way if he goes back into business on his own account and is faced with similar judgment calls, particularly taking into account that his plans to repay other creditors out of income depend on him re-establishing a high income.  An order for adjudication will not prevent him using his experience in an employed position (including continuing his present employment).

[44]     Whilst  I  can  understand  Mr  Wilson’s  wish  to  avoid  the  sanctions  of bankruptcy, I am not satisfied that he has shown any circumstances that warrant treating him differently from other debtors who have incurred substantial debt, and where there is potential for further debt to be incurred in a continuing business.17

The cases that were referred to me as comparable examples where the Court has decided not to adjudicate18  can be distinguished on the basis that the debtors were elderly and not continuing in business, or there were other special circumstances which do not exist in this case.

Allegation of oppressive conduct by Sovereign

[45]     Counsel for Mr Wilson criticised Sovereign for what he said was an un- commercial decision to continue to demand immediate payment and to pursue this bankruptcy proceeding, when other insurance companies had agreed to settle, and in

circumstances where it would recover demonstrably less than under Mr Wilson’s

17 For example Re Circuitt, above n 10and Re Guest, above n 10.

18 Re Gitmans and Re Smith.

proposal, and would likely have to repay to the bankrupt estate trail commissions that it had already received in the order of $100,000.  He said that this was evidence of a vindictive motivation, justifying exercise of the discretion not to make an order for adjudication, as occurred in Smith v Trustees Executors Ltd.19    As part of his submission  he  took  issue  with  the  fact  that  Sovereign  had  undertaken  an investigation into the circumstances under which the policies were established, but

did not put those results to Mr Wilson to allow him to answer them, or indeed put those matters forward other than in a very general way on this application.

[46]     This  argument  has  to  be  considered  in  light  of  the  fact  that  these  are commercial parties, and Mr Wilson is effectively saying that Sovereign should give him up to 10 years (and possibly substantially longer) to pay, in circumstances where there is uncertainty as to what will in fact be received by way of trail commissions, and to incur the costs of monitoring the position over this very substantial period.  In my view it cannot be considered unreasonable for Sovereign to want to bring this matter to a conclusion far sooner than the minimum period of 10 years (estimated by Mr Wilson) or the likelihood of it running on substantially beyond that.

[47]   As a commercial entity, Sovereign is aware of the potential financial consequences for it.   In addition to the factors I have already stated, it was being asked to make this decision without having been given any details as to the terms of settlement reached between Mr Wilson and the other insurers (because the terms of settlement are confidential).

[48]     I  regard  the  present  circumstances  as  quite  different  from  those  that concerned the Court in Smith v Trustees Executors Ltd.   In that case there was specific evidence before the Court on which it was able to find a vindictive intention on the part of the creditor “to get” the debtor (Mr Smith), come what may.   I am satisfied that in this case the commercial decision has been made weighing several factors.

[49]     For the sake of completeness I will mention one last point raised by counsel for  Mr Wilson,  namely  that  Sovereign  did  not  comply with  a  provision  in  the

19 Smith v Trustees Executors Ltd [2013] NZHC 384.

financial services agreement between it and Mr Wilson to negotiate any dispute that arose.   I do not see that recovery of commissions to which Sovereign was clearly entitled constitutes a dispute as envisaged by that clause.  Further, I note that the only dispute raised ahead of the judgment obtained by Sovereign was as to Mr Wilson’s personal liability.  Mr Wilson had opportunity to raise any continuing dispute as to quantum of the judgment (he initially sought information as to the make-up of the debt, which was provided).  That might have qualified as a dispute covered by the clause.  However, he did not do so.

[50]     In summary, I do not accept that Mr Wilson has established any evidential basis for an inference to be drawn that Sovereign engaged in improper conduct warranting refusal of an order for adjudication.

Decision

[51]     I am satisfied that Sovereign has established the pre-requisites for an order for adjudication, and that it is appropriate for the Court to exercise its discretion under s 36 of the Insolvency Act to make an order adjudicating Mr Wilson bankrupt. I find that Mr Wilson has not met his onus of establishing grounds for finding that it would be just and equitable for the Court to exercise its discretion under s 37 of the Insolvency Act not to adjudicate him bankrupt.

[52]     At the conclusion of the hearing, counsel for Sovereign handed the Court a certificate that Mr Wilson remained indebted to it as at that date.

[53]     I make an order accordingly adjudicating Mr Wilson bankrupt.  I also order that Mr Wilson pay Sovereign’s costs in respect of this application on a scale 2B basis, together with disbursements as fixed by the Registrar.

[54]     This order is made today at 4.30 pm.

Associate Judge Abbott