Walker v Forbes - [2013] NZHC 412

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV2012-409-002486 [2013] NZHC 412

BETWEEN ROBERT BRUCE WALKER First Plaintiff

ANDPROPERTY VENTURES LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Second Plaintiff

ANDFIVE MILE HOLDINGS LIMITED (IN RECEIVERSHIP)
Third Plaintiff

ANDAUSTIN JOHN FORBES First Defendant

ANDALISTER SPEDDING JOHNSTON Second Defendant

ANDGORDON LEWIS HANSEN Third Defendant

ANDDAVID IAN HENDERSON Fourth Defendant

ANDADOLF DE ROOS Fifth Defendant

ANDDANIEL JAMES GODDEN Sixth Defendant

ANDPWC (SUED AS A FIRM) Seventh Defendant

ANDFRIGHT AUBREY LIMITED Eighth Defendant

ANDRICHARD WILLIAMS GIBBONS Ninth Defendant

Hearing: 22 February 2013

Counsel: TGH Smith and JBM Smith for Plaintiffs
D I Henderson (In Person) - Fourth Defendant

WALKER V FORBES & ORS HC CHCH CIV 2012-409-002486 [6 March 2013]

Judgment: 6 March 2013

JUDGMENT OF WHATA J

[1] The plaintiffs seek leave to proceed against the fourth defendant, Mr Henderson, a bankrupt. He was a director of the now failed Property Ventures Limited companies.

[2] The essential reasons specified to join Mr Henderson are as follows:

(a) The plaintiffs want access to Mr Henderson’s Directors and Officers

Liability insurance;

(b)It is proper and necessary to join Mr Henderson for the purposes of establishing his liability for breach of director’s duties;

(c) The Official Assignee has no objection to the proceedings; and

(d)Any judgment would be instructive if the Official Assignee were asked to admit a claim by other plaintiffs in Mr Henderson’s bankruptcy.

[3] Mr Henderson opposes. He contends:

3.1 The fourth defendant does not have the benefit of a Directors and
Officers insurance policy with Vero Insurance Limited;

3.2Alternatively, if the fourth defendant does have the benefit of such a policy it only covers the actions and decisions of the fourth defendant taken in conjunction with the other directors named as defendants and therefore no purpose would be served by proceeding against the fourth defendant;

3.3Section 76 of the Insolvency Act 2006 does not apply as it only gives the Court jurisdiction to allow a proceeding to continue against a bankrupt if the proceeding was commenced prior to the date of adjudication.

3.4The fourth defendant would wish to defend this proceeding but has no capacity to meet the legal costs of doing so;

3.5 The plaintiffs are bringing this claim for improper purposes.

Background

[4] The first plaintiff, Mr Walker, is the liquidator of Property Ventures Limited (PVL) and many of its subsidiaries. These companies were placed into liquidation with estimated losses of at least $150 million. Mr Henderson was a managing director of PVL, (though he says not at all material times). He was adjudged bankrupt on 29 November 2010. The claim against Mr Henderson was commenced on 12 November 2012 and comprises seven causes of action against the directors of PVL for allegedly serious breaches of their duties.

[5] The relief sought by the plaintiffs includes the following:

(a) Declarations that the PVL directors have breached their duties under ss 131, 135, 136, 137 of the Companies Act 1993;

(b)Orders pursuant to s 130(1) of the Companies Act 1993 that the…

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 Walker v Forbes

Details

AGLC: Walker v Forbes [2013] NZHC 412
Case: [2013] NZHC 412
Decision Date: 6 March 2013

CaseChat Overview and Summary

The plaintiffs in the case, represented by Mr. Walker, seek leave to proceed against Mr. Austin John Forbes, a bankrupt, who was a director of the now-failed Property Ventures Limited companies. The plaintiffs aim to access Mr. Forbes' Directors and Officers Liability insurance, establish his liability for breach of director's duties, and seek compensation and other relief. Mr. Forbes opposes the proceedings, contending that the insurance policy only covers actions and decisions taken in conjunction with other directors and that Section 76 of the Insolvency Act 2006 does not permit the commencement of proceedings against an undischarged bankrupt after adjudication.

The court considered whether Section 76 of the Insolvency Act 2006 permits the commencement of proceedings against an undischarged bankrupt after adjudication, and if so, whether leave should be granted to commence proceedings. The court held that the purpose of Section 76 is to halt proceedings against a person adjudicated bankrupt and to require provable debts to be admitted by the Assignee. A discretion is conferred on the Court to "allow proceedings that had already begun before the date of adjudication" to continue. The court found that the proposed claim against Mr. Forbes relates to compensation for his alleged breaches of duty as a director prior to his adjudication, which is a provable debt in bankruptcy.

However, the court is disinclined to grant leave to continue the proceedings against Mr. Forbes for compensation under the auspices of s 76(2). The court believes that a solution lies in the scheme of the Act itself, as the insurance claim could be ventilated directly against the insurer. The Official Assignee would treat the plaintiffs as secured creditors to the extent that they hold a statutory charge over the proceeds of the insurance policy referred to in the application.

Final Orders:
The court grants leave to the plaintiffs, Mr. Forbes, and the Official Assignee to file submissions on the availability of s 237 to the plaintiffs within ten working days. The court will issue a final decision once those submissions (if any) are received. Leave is not required to commence proceedings against Mr. Forbes for declarations as to breaches of his statutory duties and/or for other relief, including prohibition against him acting as a director in the future.

Orders