Trustees Executors Limited v Cary HC Auckland CIV-2011-404-1461

[2011] NZHC 1336

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-1461

IN THE MATTER OF     the Insolvency Act 2006

AND IN THE MATTER OF the bankruptcy of T CARY

BETWEEN  TRUSTEES EXECUTORS LIMITED Judgment Creditor

ANDTRENT CARY Judgment Debtor

Hearing:         29 September 2011

Counsel:         M J Matthew and TJP Bowler for Judgment Creditor

S A Barker and J M Phillips for Judgment Debtor

Judgment:      11 October 2011

RESERVED JUDGMENT OF ELLIS J [on Stay application]

This judgment was delivered by me on 11 October 2011 at 5.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:           Buddle Findlay, PO Box 2694, Wellington 6140

Grove Darlow & Partners, PO Box 2882, Auckland

TRUSTEES EXECUTORS LIMITED V CARY HC AK CIV-2011-404-1461 11 October 2011

[1]      Mr Cary wishes to appeal my decision dated 12 September 2011 declining to adjourn Trustees Executors Limited’s (TEL’s) adjudication application and (accordingly) adjudicating him bankrupt.   He seeks a stay of execution pending the resolution of that appeal and a restraint on advertising.  The applications are opposed by (TEL) (the judgment creditor) and by South Canterbury Finance.

[2]      I note at the outset that Mr Cary has not yet filed a notice of appeal against my decision.   As well as casting doubt on his willingness to pursue the matter expeditiously it also means that there was a lack of clarity about which aspect of my judgment he wishes to appeal.  While the application for stay itself appears to relate to  my  decision  as  a  whole  (i.e.  both  the  adjournment  and  the  adjudication) Ms Matthew advised that her instructions were that only my refusal to grant an adjournment of the adjudication  application  would  be the subject  of  Mr Cary’s appeal.  It is difficult to see however, how it is logically possible to separate the two particularly given Mr Cary’s “synchronicity of focus” noted in my earlier judgment. I therefore proceed on the basis that any appeal would encompass both aspects of my decision.

[3]      I also record at the outset that further affidavits have been filed in relation to the application for stay.   Some of them concern matters referred to in affidavits which  I previously declined to read for the reasons set out in  my judgment of

12 September 2011.  I accept, however, that I am able to read them in the context of the present application.

[4]      The principal ground advanced in support of the application is that Mr Cary’s

appeal rights would be rendered nugatory if a stay is not granted.

[5]      Essentially for the reasons advanced by Mr Barker,  I do not accept that Mr Cary’s appeal rights would be rendered nugatory in the absence of a stay.  As Mr Barker said, there are three reasons for this:

(a)      section  414(2)  of  the  Insolvency  Act  2006  (the  Act)  expressly provides that a bankrupt may appeal to the Court of Appeal from a decision of the Court under the Act;

(b)a judgment debtor may also apply for an order suspending the adjudication until any appeal is decided under s 416 of the Act; and

(c)      in terms of any ongoing desire by Mr Cary to put a proposal to creditors under Part 5, he will be able to enter into a composition with creditors under subpart (1) of Part 5 of the Act.  Such a composition operates within the bankruptcy, rather than as an alternative to it. And if accepted by creditors and approved by the Court a composition would result in annulment of the bankruptcy: s 317(2).

[6]      As to the merits of the proposed appeal, I record that Mr Cary has identified a great many errors in my decision.   Whether or not those allegations of error will ultimately be reflected in a formal notice of appeal is yet to be seen.  I note, however, that a considerable number of the proposed grounds relate to Mr Cary’s contention that I placed “insufficient weight” on certain matters.   That seems potentially problematic in terms of what is an appeal from the exercise of discretion.  A number of  the  grounds  also  rely  on  his  contention  that  the  evidence  before  me  was incomplete or wrong.

[7]      On one level that contention merely serves to emphasise the points made in my 12 September judgment about Mr Cary’s somewhat cavalier approach to disclosure and about the logistical difficulties presented to the court by the lateness of the adjournment application.   The reality is  that the Court was able only to determine the applications on the basis of the evidence that was before it.  Moreover, I  note  in  passing  that  some  of  the  facts  now  put  forward  by  Mr  Cary  appear somewhat dubious.   For example, his contention that it was his wife (rather than Mr Cary himself) who “asserted” the existence of residential tenancy in relation to the Benson Road property does not appear consistent with the position taken by him in relation to TEL’s summary judgment application.   In his decision on that application dated 18 February 2011 Associate Judge Faire stated at [9]:

The first and second defendants have sworn affidavits.  It is alleged by them that a tenancy agreement was entered into by the second defendant with the first defendant in his capacity as trustee in respect of 52 Benson Road, Remuera,  Auckland  and  in  favour  of  the  second  defendant  as  tenant. Although initially the agreement was not produced a copy has now been

made available to the court.   The agreement provides no fixed term.   It provides for the payment of a weekly rental of $1,200 to be paid “as and when required by the trust”.

[8]      Thus it seems that both Mr Cary and his wife “asserted” the existence of the residential tenancy agreement.   While it may be that the tenant under that alleged agreement was Mr Cary’s wife it seems plain enough that he was a party to it (as trustee).  For that reason I view with some scepticism Mr Cary’s contention that it was his wife alone who made decisions about the carriage (and abandonment) of the residential tenancy proceedings.

[9]      Other  matters  raised  by  Mr  Barker  that  militate  against  the  present application for stay can also be recorded in passing.

[10]     First, it remains unclear whether that Mr Cary does in fact have the numbers required for his proposal to be put before the Court.

[11]     Secondly, the interests of the general public do not favour  a (potentially lengthy) stay.   In that respect Mr Barker referred in particular to the statement by Master Kennedy-Grant in Bruns, ex parte Trust Bank Central Limited:[1]

... the provision of section 42(4)(a) of the [Insolvency Act 1967] that the bankruptcy relates back to and commences at the time of the act of bankruptcy on which the order is made adjudicating the debtor bankrupt. In this  case,  i.e.  21  January  1992,  already  something  over  7  months.  If Mr Bruns is adjudicated bankrupt now his property vests in the Official Assignee with effect from 21 January 1992. Persons who have dealt with him in the interim may find their transactions are invalid. The longer this goes on the more people are placed at risk. This cannot be in the interests of the general public: Re Nesbitt (supra). A stay would, if it were subsequently dissolved and an order of adjudication made, have the effect of prolonging the period of potential invalidity of transactions even further. It has been long enough already.

[1] Re Bruns, Ex parte Trust Bank Central Ltd HC Auckland B2436/91, 4 September 1992.

[12]     Under the Insolvency Act 2006 a bankruptcy commences on the date and time of adjudication (s 55) rather than at the time the relevant act of bankruptcy is committed.  Nonetheless I accept that the effect of granting a stay would necessarily be to create undesirable uncertainty for all those with whom Mr Cary transacted

during the period of his adjudication and any lifting of the stay.

[13]     And thirdly, the further evidence filed in opposition to the stay reveals that on

30 August 2011 (the day before the adjudication/adjournment hearing before me) Mr Cary transferred his shareholding in York Trustees Limited to his father-in-law. Mr Cary has also admitted transferring his shareholding in No Leak Limited to his father-in-law on the same day.   No evidence has been given of the consideration received for that transfer and I accept Mr Barker’s submission that there may well be value in the shares transferred.

[14]     This last point again serves to underscore my concerns about the adequacy of his disclosure in circumstances where he is seeking an indulgence from the Court.  In my  view  Mr  Cary’s  disclosure  has  been  (at  best)  casual  and  disingenuous throughout. There may well be a real benefit in involving the Official Assignee.

[15]     Lastly, I record that there was a further issue about whether the application for a stay involved breach of an undertaking given by Mr Cary’s former counsel in the context of the adjournment application.   Because of the view I have already formed, however, it is unnecessary for me to consider that further.  Were I to do so, however, there is no possibility that it would assist Mr Cary’s position.

[16]     For all the reasons I have given Mr Cary’s application for stay is declined.

Rebecca Ellis J