Urquhart - [2021] NZHC 1326

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-001457

[2021] NZHC 1326

UNDER Subpart 2 of Part 5 of the Insolvency Act 2006

IN THE MATTER OF

The proposal to creditors of CRAIG ALEXANDER URQUHART

Hearing:
23 March 2021

Further submissions received 23 and 26 April 2021

Appearances:

P R Cogswell for Provisional Trustee

B P Molloy and C P Tatley for Oxford Finance Ltd (a creditor in opposition)

Judgment:

8 June 2021

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

RE URQUHART [2021] NZHC 1326 [8 June 2021]

Introduction

[1] The provisional trustee of the insolvent, Mr Craig Urquhart, applies for approval of a proposal to creditors, pursuant to s 333 of the Insolvency Act 2006.

[2] The proposal provides for payment of $40,000 in one instalment to participating unsecured creditors. That sum is contributed from the proceeds of the sale of an asset (motorbike) owned by the Halstaff Trust, and the balance in a cash contribution by the Halstaff Trust.

[3] The proposal represents a recovery to creditors of 8.5 cents in the dollar. That is said by the trustee to be better than the anticipated nil recovery in any bankruptcy.

[4] It is not in dispute that the voting and procedural requirements of Part 5, sub- Part 2 have been complied with in accordance with s 333(3)(a).

[5] The largest of the unsecured creditors, Oxford Finance Ltd (Oxford) opposes the application on the grounds that:

(a)The terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors (s 333(3)(b)); and/or

(b)It is not expedient that the proposal be approved (s 333(3)(c)).

Factual background

[6] This is a second application brought by Mr Urquhart for the approval of a proposal. In 2011, Mr Urquhart entered into a creditors proposal, which the Court approved pursuant to s 333 of the 2006 Act. Mr Urquhart says that that earlier proposal followed the demise of Finco Holdings Ltd, a finance company, with which he was associated.

[7] In his present statement of assets, debts and liabilities, Mr Urquhart states that as at 31 August 2020, he had unsecured debts and liabilities of $379,636.84 and secured creditors’ debts of $4,604,948.44 (i.e. total debts and liabilities of
$4,984,585.28).

[8] Most of the secured creditor debt consists of Mr Urquhart’s liability as a guarantor for various family trusts of which he is a trustee and discretionary beneficiary. That is apparent from the following table of “secured creditors” attached to Mr Urquhart’s statement of assets, debts and liabilities:

Creditor1 Liability/Shortfall NZ$ Liability As

Asset Finance $359,912.82 Thelma Trustee / Guarantor

BNZ $1,085,508.80 Claire Trust / Guarantor

BNZ $327,388.82 Jewell Trust / Guarantor

BNZ $478,580.34 Solutions Group Investments Ltd / Guarantor

BNZ $17,957.66 Credit card

Tablehill Farms Ltd $448,425.00 Solutions Group Investments Ltd / Guarantor

J D Tuscan Downs Trustee Company Ltd $301,575.00 Solutions Group Investments Ltd / Guarantor

Tablehill Farms Ltd $230,550.20 MBG (Securities) Ltd / Guarantor

J D…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Urquhart

Details

AGLC: Urquhart [2021] NZHC 1326
Case: [2021] NZHC 1326
Decision Date: 8 June 2021

CaseChat Overview and Summary

The case of Urquhart involved a proposal by Craig Alexander Urquhart, who was insolvent, to his creditors. Urquhart sought approval for a proposal to pay his unsecured creditors 8.5 cents in the dollar, which was to be funded by the proceeds from the sale of an asset and a cash contribution from the Halstaff Trust. The largest unsecured creditor, Oxford Finance Ltd, opposed the proposal on the grounds that it was not reasonable or calculated to benefit the general body of creditors, and that it was not expedient that the proposal be approved.

The court had to decide whether the terms of the proposal were reasonable and whether it was expedient to approve it. The court found that while the proposal had been supported by the majority of creditors, the unsecured creditor's views were more relevant in this case due to the significant overlap between the reasonableness and expediency factors. The court also found that there were unanswered questions about Urquhart's true financial position and whether he had other undisclosed financial means. The court considered transparency to be an important factor in evaluating the statutory criteria and found that there had been a clear lack of transparency in this case.

The court concluded that the application should be refused as the proposal was neither reasonable nor expedient. The court found that there was a public interest factor relevant to this application, namely that Urquhart continued to be involved in the finance industry and had made himself judgment-proof while remaining a guarantor for substantial sums of money. The court also noted that Urquhart's lack of personal assets was suggestive of a cavalier attitude to his personal guarantees.

The court dismissed the application by the provisional trustee for approval under s 333 of the Insolvency Act 2006 and declined to approve the proposal. The court found that Oxford, in successfully opposing the application, was entitled to costs on a 2B basis.

Orders