Wang v Galloway Properties Limited - [2018] NZHC 284

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2088

[2018] NZHC 284

UNDER Part 5 of the Insolvency Act 2006

IN THE MATTER

of the proposal by Xueliang Wang for her creditors

BETWEEN

XUELIANG WANG

Applicant

AND

GALLOWAY PROPERTIES LIMITED

Respondent

Hearing: 27 February 2018

Appearances:

D B Hickson and J Wong for the applicant N Woods for the respondent

Judgment:

2 March 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction

[1] This is an application pursuant to pt 5, sub-pt 2 of the Insolvency Act 2006 for approval of a proposal presented on behalf of Xueliang Wang (debtor).

[2]It is opposed by Galloway Properties Ltd (Galloway), one of her creditors.

Background

[3] It is common ground that by about mid 2017 the debtor had amassed debts of over $350,000 and had very limited assets available with which to meet her obligations. As I understand the evidence, this situation arose as a result of a failed

WANG v GALLOWAY PROPERTIES LIMITED [2018] NZHC 284 [2 March 2018]

property development business. However, the details of that are not otherwise relevant to the disposal of the application.

[4] On 12 September 2017, the debtor filed and served a proposal in the manner provided for in the Act. This was supported by a statement of her affairs in affidavit form which purported to set out her assets and liabilities and list her creditors.

[5] The list of creditors did not include Galloway, to which company she was indebted in the sum of $15,117.06 plus interest and costs. The debtor’s evidence, which I accept, is that this omission was accidental. She says that as her indebtedness to Galloway arose from a guarantee she had provided of the obligations of the development company pursuant to a lease, this contingent obligation was not at the top of her mind when she turned her attention to identifying her creditors.

[6] However, accidental or not, the omission of course meant that Galloway did not receive the proposal, and did not have the opportunity to participate in the process provided for in the Act.

[7] The debtor’s proposal was — and indeed is — that she raise $60,000 from family sources in China, and make this available to be distributed pro-rata amongst her creditors. That would involve a payment of approximately 17% of her total debt.

[8] The creditors’ meeting was scheduled to be held in Auckland on 22 September 2017. With one exception, all of the creditors who had been notified of the proposal apparently wrote to the proposed trustee prior to that date indicating that they supported the proposal and would not be attending. The exception was Best Doors Ltd. That company did attend the creditors’ meeting through one of its directors, and voted against the proposal. The upshot was that 90% (by number) and 99% (by value) of the creditors who received the proposal voted to approve it.

[9] Subsequent to the creditors’ meeting, the proposed trustee…

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 Wang v Galloway Properties Limited

Details

AGLC: Wang v Galloway Properties Limited [2018] NZHC 284
Case: [2018] NZHC 284
Decision Date: 2 March 2018

CaseChat Overview and Summary

In the High Court of New Zealand, Associate Judge Johnston presided over an application by Xueliang Wang for the approval of her proposal under the Insolvency Act 2006, which was opposed by Galloway Properties Limited. The debtor's proposal aimed to raise $60,000 from family sources to be distributed among her creditors, offering approximately 17% of her total debt. However, Galloway, which was owed $15,117.06 plus interest and costs, was not included in the list of creditors due to an accidental omission by the debtor. This omission led Galloway to miss the opportunity to participate in the creditors' meeting, where the proposal was overwhelmingly approved by the other creditors.

The legal issues before the court were whether the proposal should be approved despite the procedural defect of not identifying all creditors and whether the omission of Galloway would have altered the outcome of the creditors' meeting. Galloway argued that the procedural error was prejudicial and that they could have influenced other creditors to vote against the proposal, potentially leading to the debtor's bankruptcy. The debtor, however, contended that the procedural error was merely technical and that the outcome would not have changed with Galloway's participation.

The court considered the precedents set in Re Lowndes and Farmer v Rowley, which indicated that procedural failures could be overlooked if the proposal's approval was in the best interest of the creditors. The court found that while the debtor's procedural error was significant, the overwhelming support for the proposal by the majority of creditors, both in number and value, indicated that the outcome would likely have remained the same even with Galloway's participation. The court approved the proposal with amendments to ensure that all creditors, including Galloway, received a distribution under the proposal and that the entire $60,000 was available for distribution to creditors.

Orders