Worldclear Limited v Whitham

[2019] NZHC 1178

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2018-419-000293

[2019] NZHC 1178

UNDER

the Insolvency Act 2006

IN THE MATTER OF

the bankruptcy of Richard James Whitham

BETWEEN

WORLDCLEAR LIMITED

Judgment Creditor

AND

RICHARD JAMES WHITHAM

Judgment Debtor

Hearing:	27 May 2019
Appearances:	J S Ridling for Judgment Creditor No appearance for Judgment Debtor
Judgment:	28 May 2019

REASONS JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 28 May 2019 at 2.45 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date……………….

WORLDCLEAR LTD v WHITHAM [2019] NZHC 1178 [28 May 2019]

Introduction

[1]    The judgment creditor, Worldclear Ltd, seeks an order of adjudication pursuant to s 20 of the Insolvency Act 2006 on the grounds that the judgment debtor, Mr Richard Whitham, has departed from New Zealand with the intention to defeat or delay his creditors.

[2]    Mr Whitham has taken no steps in the proceedings and it is understood that he is currently in Singapore on bail pending the determination of criminal charges before the Singapore courts.

Background

[3]    Worldclear Ltd is a financial service provider. It provides account, foreign exchange and payment services to personal, commercial and institutional customers who are in and outside of New Zealand.

[4]    Worldclear hired Mr Whitham, who was the director and shareholder of TI Holdings Ltd (TI Holdings), to open bank accounts with New Zealand and overseas banks.

[5]    Mr Whitham was employed to seek banking relationships for Worldclear from August 2017. He would contact main trading banks to see whether he could develop a relationship with them, and inform them about Worldclear and its business, and ask them to provide banking services to Worldclear.

[6]    Mr Whitham was unsuccessful using this approach, so in December 2017, TI Holdings was formed to be the vehicle through which Mr Whitham would operate bank accounts and conduct financial transactions on behalf of Worldclear.

[7]    Worldclear paid Mr Whitham an hourly rate as an employee and also paid another entity controlled by him, Retail Guru Ltd (Retail Guru), performance bonuses for opening accounts in the name of TI Holdings on its behalf, and a monthly director fee for being the director of TI Holdings.

[8]    The funds that were paid into the TI Holdings accounts were from Worldclear or on its behalf and were held by TI Holdings on behalf of Worldclear. Worldclear then instructed TI Holdings to make financial transactions from the accounts on its behalf.

[9]    In May 2018, after payment to Worldclear’s customers ceased being paid by TI Holdings, Mr Whitham and his family left New Zealand for Singapore.

Freezing order

[10]   On 23 May 2018, Davison J, upon application by Worldclear, made orders freezing the assets and accounts of Mr Whitham, TI Holdings and Retail Guru.

Proceedings in Singapore

[11]   On 11 June 2018, the Supreme Court of Singapore granted Mareva injunctions against Mr Whitham, TI Holdings and Retail Guru. On 26 July 2018, the Supreme Court of Singapore granted a default judgment against Mr Whitham, TI Holdings, Retail Guru and others. The amount of the judgment is NZ$4,541,858.

Liquidation proceedings

[12]   On 25 May 2018, Worldclear filed an application to put TI Holdings into liquidation.

[13]On 9 July 2018, this Court made an order placing TI Holdings into liquidation.

[14]   On 14 December 2018, Retail Guru was placed into liquidation by order of this Court.

Concurrent proceedings

[15]   On  27  June  2018,  Worldclear  filed   High   Court   proceedings   against Mr Whitham, TI Holdings and Retail Guru. Worldclear alleges as against the defendant parties, breach of contract, conversion, money had and received and

knowing receipt. Mr Whitham has not filed any statement of defence nor engaged in any real way in the proceeding.

[16]   Worldclear obtained a judgment by way of formal proof against Retail Guru Ltd1. Lang J concluded:2

The material provided by Worldclear in support of its application for judgment by formal proof satisfies me that all three defendants [which includes Mr Whitham] have acted in concert to convert funds belonging to Worldclear to their own use. This has ultimately resulted in Retail Guru receiving the sums of NZ$50,000 and US$250,000 (NZ$382,965.68).

[17]   Worldclear is currently awaiting a judgment against Mr Whitham by way of formal proof in the same proceedings.

Service of bankruptcy proceedings on the debtor

[18]   On 16 August 2018, Mr Whitham agreed to accept service of documents by way of email at his email address.

Analysis and decision

[19]   I am satisfied that Worldclear has established that Mr Whitham has committed an act of bankruptcy and that in the exercise of my discretion under s 36 of the Insolvency Act 2006, he should be adjudicated bankrupt.

[20]   The evidence establishes that Mr Whitham left New Zealand with the intention of defeating his creditor, namely the judgment creditor, Worldclear.

[21]   Proof of the requisite intent under s 20 may frequently be achieved only by inference and it is well settled law that in these types of case, it is proper to infer that a man intends the necessary consequences of his own acts.3 On the basis of the evidence filed by Worldclear, that inference (namely intention) can be inferred in this case.

1      Worldclear Ltd v TI Holdings Ltd (in liquidation) & Whitham [2018] NZHC 2803.

2      Worldclear Ltd v TI Holdings Ltd (in liquidation) & Whitham, above at n 1, at [16].

3      LMVD Finance (NZ) Ltd v Bryan HC Christchurch B110/83, Hardy-Boys J, 4 November 1983 at p2.

[22]   It is equally clear that it is not necessary under s 20 for there to be an existing debt. The “awareness of an impending liability is sufficient …”.4

[23]   In his minute of 4 March 2019, Associate Judge Smith raised the issue at [4] as to whether Mr Whitham’s remaining outside of New Zealand, when he is on bail in Singapore, could be regarded as voluntary. His Honour noted that if Mr Whitham was prevented from leaving Singapore at sometime before 21 June 2018 there might be an issue as to whether the act of bankruptcy relied upon occurred within three months before the filing of the creditor’s application.

[24]   However, I find that in this case, Mr Whitham’s status as an accused person on bail in Singapore, does not preclude me from making an order adjudicating him bankrupt. On the available evidence Mr Whitham has taken no steps at all to defend the proceedings and a number of the other related High Court proceedings. He has remained outside of New Zealand since he departed in May 2018 (with, as I have found, the intention of defeating his creditors) and has made no attempt to pay back any of the money he owes Worldclear (and which it is alleged, he unlawfully took). Furthermore, ongoing investigations have shown that he has transferred portions of the amounts he owes into other jurisdictions in order to further alienate the money from Worldclear.

[25]   I am also satisfied, that as a matter of discretion, it is in the public interest that the Official Assignee undertake an investigation into Mr Whitham’s financial affairs and activities.

[26]   For all these reasons I find that I should make an order adjudicating Mr Whitham bankrupt.

Result

[27]The judgment debtor, Mr Richard James Whitham, is adjudicated bankrupt.

[28]My orders are timed at 10.05 am on Monday, 27 May 2019.

4      Barton v Deputy Federal Commissioner of Taxation [1974] 131 CLR 370, cited with approval by Hardy-Boys J in LMVD Finance (NZ) Ltd v Bryan, above n 3.

[29]   I order that Mr Whitham is to pay costs on a 2B scale basis to the judgment creditor, Worldclear Ltd, together with disbursements as fixed by the Registrar.

Associate Judge P J Andrew