Ross v Ross HC Wellington CIV-2010-485-2515 [2011] NZHC 1165 (29 September 2011)

Last Updated: 21 October 2011

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

_{CIV-2010-485-2515}

IN THE MATTER OF the Insolvency Act 2006

AND IN THE MATTER OF the bankruptcy of BRYAN KEITH ROSS

BETWEEN TEDDI ALISON ROSS Judgment Creditor

Hearing: 23 August 2011 (Heard at Wellington)

Counsel: J.L. Foster - Counsel for Judgment Creditor

B. Balderstone & E. Ritchie - Counsel for Judgment Debtor

J. Sumner - Counsel for Provisional Trustee

Judgment: 29 September 2011 at 3:30 PM

_{JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

This judgment was delivered by Associate Judge Gendall on 29 September 2011 at

3.30 pm under r 11.5 of the High Court Rules.

Solicitors: Macky Robertson, Solicitor, PO Box 37-622, Auckland

Buddle Findlay, Solicitors, PO Box 2694, Wellington 6140

TA ROSS v BK ROSS HC WN CIV-2010-485-2515 29 September 2011

Introduction

[1] Before the Court are two applications:

(a) An application by the judgment debtor, Brian Keith Ross (Mr Ross) for an order approving a Part 5 creditors’ proposal under the Insolvency Act 2006 (the Act); and

(b) An application by the judgment creditor, Teddi Alison Ross (Ms Ross) dated 6 May 2011 for an order adjudicating her former husband Mr Ross bankrupt.

[2] The application for approval of the Part 5 creditors’ proposal is opposed by

Ms Ross.

[3] The adjudication application is opposed by Mr Ross.

[4] The parties agree it is appropriate to deal with the Part 5 Insolvency Act 2006

Proposal Application first. They accept that if it succeeds then there is no need to consider the Bankruptcy Application.

[5] First, however, it is useful to set out some background facts.

Background Facts

[6] Mr Ross is an IT contractor who lives and works in Wellington. He is currently employed by his own company, TRC Partners Limited (TRC) of which he is a director. He is originally from the United States of America but moved to New Zealand in 1995 for work opportunities. After working as an IT contractor for IBM, he contracted his services, through another company owned by him, H.O.D Technologies Limited (H.O.D Technologies), to a company called Astarte Ltd, now referred to as i-lign Limited, (“i-lign”) and later became a direct employee of i-lign.

[7] Mr Ross maintains that, as result of non-payment of $237,000 for services rendered by H.O.D Technologies to i-lign, he came under immense financial strain.

This eventuated in the liquidation of H.O.D Technologies. Mr Ross resigned from i- lign, and has since been a self-employed IT consultant working for TRC, a company which he set up with his present wife. TRC had a contract to provide services to a government department which expired on 30 June 2011. This contract it seems was not renewed. Since then, TRC has secured a new contract with that government department.

[8] Mr Ross and Ms Ross were previously married but divorced in New York in

2011. Both Mr Ross and Ms Ross were living in New Zealand at the time of the divorce. The debt that is the subject of Ms Ross’ application for adjudication represents a maintenance award stemming from the divorce proceedings in the Supreme Court of New York in favour of Ms Ross in an amount of US$300 per week for a period of 3 years (a total of USD46,800) plus legal costs.

[9] Mr Ross made some payments to Ms Ross towards these maintenance obligations but he says due to financial strain on his business, legal fees and other financial obligations resulting from the divorce proceedings, he defaulted on subsequent payments. These defaults were remedied in part, first, by way of weekly payments of US$200 instead of the required US$300 and then sporadically when his income allowed for payment. Mr Ross was living in New Zealand at the time, and earning in New Zealand dollars.

[10] The maintenance award was converted to judgment for a debt sum in New York, whereupon on 31 October 2006 it was entered as a New Zealand judgment in this Court following an application by Ms Ross for summary judgment. The sum then owing was US$84,776.54 plus interest and costs. This decision was appealed to the Court of Appeal by Mr Ross. The appeal was unsuccessful, however, and a costs award was made in Ms Ross’ favour. Since then she has served Mr Ross with two bankruptcy notices dated 15 December 2010, neither of which have been paid by Mr Ross.

[11] Given Mr Ross’s indebtedness at that stage, and his wish to avoid bankruptcy, he puts the present proposal to his creditors under Part 5 of the Act. Mr Ross had, by December 2010, a primary and a costs judgment against him, two significant legal

bills from his New York and New Zealand lawyers, and various credit card debt, all of which he maintains he could not afford to pay in total.

The Proposal

[12] The proposal from Mr Ross to his creditors provides a statement of his assets, debts and liabilities. As to his assets, these are listed as cash in the bank $320.97, furniture and personal effects - $8,000.00 and minimal other assets totalling $254.86. Thus, his assets he says total $8,575.83, (although it does appear that he has not listed a Kiwi Saver Superannuation Scheme credit he holds and any “interest” in a house property he occupies held by two family trusts – more on this later).

[13] As to his debts and liabilities, Mr Ross shows total unsecured creditors of

$1,080,247.32. These are listed as follows:

(a) ASB Mortgage $ 718,509.89 (b) LA Cobb Family Trust $ 68,897.77 (c) BK Ross Family Trust $ 68,897.77 (d) G Thwaite $ 18,928.75 (e) H Spizz $ 9,839.37 (f) ASB Credit Card $ 15,184.38 (g) BNZ Credit Card $ 10,946.39 (h) GEC Finance $ 4,043.00

_{(i) Ms Teddi Ross $ 165,000.00}

$1,080,247.32

[14] The terms of his proposal to creditors provides for a payment of $30,000.00 to be made available to the proposed trustee from the BK Ross Family Trust. This is to be made by way of an immediate payment of $15,000.00 and a further payment of

$15,000.00 one year from the date of acceptance of the proposal.

[15] After deduction of trustees’ expenses and fees the net amount available for creditors will be approximately $25,000.00 and that amount is to be paid by way of dividend to creditors. In addition, Mr Ross proposes that this $25,000.00 may be augmented by any contribution that he is able to extract from the Kiwi Saver Superannuation Scheme which he holds the details of which, however, are not before the Court. Mr Ross undertakes to apply himself diligently to extract any moneys that his Kiwi Saver provider will pay out to him under the financial hardship provisions applicable to the scheme he operates within.

[16] The proposed trustee under the proposal is Mr Terrence Charles Webb Bastion (Mr Bastion) a Wellington Chartered Accountant. Mr Bastion has provided a report on the proposal.

Counsels’ Arguments and My Decision

[17] The present application is made under s 333 of the Act.

[18] Section 333(3) of the Insolvency Act sets out the circumstances where the

Court may refuse to approve a proposal if it considers that:

(a) The provisions of Part 5 Sub-Part 2 dealing with proposals generally have not been complied with.

(b) The terms of the proposal are not reasonable or not calculated to benefit the general body of creditors.

(c) For any reason it is not expedient that the proposal be approved.

[19] The application of s 333(3) was considered recently by the Court of Appeal in Magsons Hardware Ltd v Bogiatto [2011] NZCA 378 at paras [22] and [23] in the following way:

[22] We agree with [the] identification of a two step process to be followed when considering an application. The first or threshold inquiry is whether either or both of the s 333(3)(b) or (c) tests have been met; if so, the second inquiry is whether the court should exercise its residual discretion to refuse approval. As Richardson J observed in Farmer v Rowley:

The Court may refuse its approval if and only if it is of the opinion that one or more of the trigger paras (a), (b) and (c) [under the predecessor s 143(3) of the Insolvency Act 1967] applies. It follows that the exercise of the discretion reposed in the court under this section must be related to the particular paragraphs or paragraphs relied on.

[23] In the same case, McKay J cited with approval[1] this passage from the judgment of Hardie Boys J in Re Bennetts’ Proposal:[2]

Therefore I think it proper to deal with an application under s 143 a little differently from one under s 122. Rather than it being for the proponents of a scheme to show that it ought to be approved, I think the Court should accept the view of the creditors, or the majority of them, and grant approval unless it is apparent that one of the grounds for refusing approval exists. The Court is clearly required to exercise its independent judgment, for considerations of wider public interest are relevant, and therefore even unanimity amongst the creditors will not be predeterminative of approval. But unless it is clear that the creditors generally would fare better under a bankruptcy, approval ought normally to be given unless other special circumstances militate against it. Whilst a proposal ought not to be imposed upon dissentient creditors if that would be disadvantageous to them as members of the general body of creditors their dissent should not be upheld if to do so could be prejudicial to the general body of creditors.

[20] At the creditors’ meeting held on 13 May 2011 which was presided over by Terrence Charles Webb Bastion (Mr Bastion) the provisional trustee, Mr Ross’ proposal was accepted by what appeared to be the required majority of creditors. Those creditors voting in favour of the proposal were the ASB Bank, the BK Ross Family Trust, the LA Cobb Family Trust, the BNZ and Mr H Spizz. The total amount in dollar values of their proven claims was said to be $896,581.87

_{representing 83.78% in value of total creditors.}

[21] Only one creditor voted against the proposal this being Ms Ross. Her debt established as a proven claim was said to be $173,518.80 representing only 16.22% in value of the total creditors.

[22] As a result, Mr Ross contends that the required majorities under the

Insolvency Act 2006 have been reached and in terms of s 333(3)(a) Insolvency Act

2006 the provisions of Sub-Part 2 of Part 5 of the Act have been complied with.

[23] Addressing this particular issue now, at the outset one matter of concern arises. This relates to the description of Mr Ross’ assets in his proposal as totalling only $8,575.83 as noted at para [12] above. His liabilities, however (being all described as “unsecured creditors”), are shown as totalling $1,080,247.32 as outlined at para [13] above. These liabilities include the sum of $718,509.89 owing, it is said, on the ASB mortgage.

[24] What does appear clear is that the ASB mortgage was advanced to the LA Cobb Family Trust and the BK Ross Family Trust for the purchase by them of a residential property at 40 Arahiwi Grove Tirohanga, Lower Hutt (the property) occupied by Mr Ross and his present wife, Ms Cobb, as their family home. The trusts were set up by Mr Ross and Ms Cobb in 2003, he deposes at [28] of his 20

June 2011 affidavit “to protect our family assets”. They purchased the property, as I understand the position, at a price of around $803,000.00. An affidavit before the Court from Mr Ross confirms that the quotable value Government Valuation of this property is $760,000.00. Notwithstanding this, Mr Ross in his proposal has chosen not to include details of its value or any mention of the property over which ASB holds its first mortgage in any way in his asset list. Instead, as I have noted above, he has shown the ASB mortgage of $718,409.89 as a personal liability of his (along with the ASB credit card debt of $15,184.38) with no reference to any off-setting value of the property owned by the Trusts.

[25] Although it is clear this property is owned by the two trusts and that Mr Ross’ liability under the mortgage is a contingent one effectively as a guarantor, in my view it is quite misleading in his statement of position not to make some reference to

the value of the property held as security against the ASB mortgage liability listed by

Mr Ross as an “unsecured creditor” at $718,509.89.

[26] Whilst on the authorities it must be accepted that a contingent liability such as that arising under a personal guarantee still comes within the definition of a “provable debt” in terms of s 232 Insolvency Act 2006 and thus constitutes a debt for which the ASB here as creditor is entitled to vote on the Part 5 proposal – see Re Ridler (1882) 22 Ch D 74 and Brookers Insolvency Law & Practice IN 232.07 - this does not, in my view, affect the relevance of what I see as a significant misleading in the financial position of Mr Ross portrayed in his creditors’ proposal. Because of the inclusion in Mr Ross’ position of the total ASB mortgage debt and no corresponding off-set of value or indemnity/right of subrogation from the trusts regarding what is clearly the significant value of the property, a huge financial deficit (by way of those substantial liabilities exceeding minimal assets) arises. In my view this is quite deceptive. On seeing the proposal from Mr Ross, all creditors would have presumed understandably that the gap between his total liabilities and total assets was enormous. In addition, the proposal and its supporting documents are further deficient as I see it in that they make no mention of Mr Ross’ disposable income which is significant – more on this later. Suffice to say at this point that these aspects may well have impacted in a material way upon the decision making processes of all the creditors when they turned to consider the proposal.

[27] Notwithstanding these concerns, and they are real concerns, for present purposes I propose to presume for the moment that, from a technical perspective alone, the provisions of s 333 (3)(a) Insolvency Act 2006 have been complied with.

[28] That leaves for consideration s 333(b) and (c) and issues as to whether first, the terms of the proposal are reasonable or calculated to benefit the general body of creditors and secondly, whether for any reason it might not be expedient that the proposal should be approved.

[29] In this case, as I have noted above, the only creditor voting against the proposal was Ms Ross. Her debt is for the balance of unpaid maintenance or

alimony interest and costs which has been outstanding from her former husband Mr

Ross for many years.

[30] Mr Ross’ only other creditors (leaving aside the ASB mortgage debt owed by the two trusts) are the ASB for a credit card debt of $15,184.38, the two trusts for some $68,800.00 each, amounts owing on a credit card of $10,946.39 to the BNZ, a

$4,043.00 loan debt to GE Finance, and again reasonably small amounts outstanding

to Mr Ross’ former lawyers for legal fees.

[31] Ms Ross’ debt with interest and costs now amounts to some $165,000.00.

[32] One aspect urged upon me at the hearing of this matter by counsel for Mr Ross was the contention that Ms Ross as his former wife in opposing the present proposal is acting in an entirely vindictive manner. With respect I disagree.

[33] The debt owing to Ms Ross is for personal maintenance, interest and costs and most of it has been outstanding for some years. There seems little doubt that Mr Ross opposed the original order in the United States granting maintenance to Ms Ross, and also opposed and unsuccessfully appealed her application to have this registered as a judgment in New Zealand. It seems that, for whatever reason, he is opposed to making any further payments to Ms Ross as his former wife, other than the relatively tiny contributions (probably between 2% and at best possibly 5% of total debt) outlined in his proposal.

[34] That said, and stripping away the technical aspects of the vote by creditors in favour of this proposal, the Court is left with a situation where only the two trusts associated with Mr Ross and his present wife Ms Cobb, together with the ASB Bank (essentially on a $15,184.38 credit card debt) and two other creditors with relatively minor commercial debts in the overall scheme of things, support the proposal, as against Ms Ross’ opposition.

[35] In my view, a possible argument exists here that the true intentions behind Mr Ross’ decision to put forward the present proposal relate in essence to his attempt to defeat Ms Ross’ claims under the maintenance payment order. That would be the

likely result in terms of s 334 Insolvency Act 2006 which provides that once a proposal is approved by the Court, all creditors are bound by it. If that is in fact the case then it is clear this course of action should not be countenanced. More on this aspect later.

[36] I turn now to consider specifically s 333 (3) (b) and (c) Insolvency Act 2006.

Section 333(3)(b) Are the terms of the proposal not reasonable or not calculated to benefit the general body of creditors?

[37] As I have noted, the general body of Mr Ross’ creditors are outlined at para [13] of this judgment. The large ASB mortgage debt, despite Mr Ross’ guarantee, is effectively covered in the main by the mortgage held by the bank over the property owned by the two trusts and the personal covenant from the trusts. There is only therefore the sum of about $15,184.38 owing by Mr Ross to the ASB on his credit card which in my view can be truly shown as a debt he will ultimately be required to meet to the ASB.

[38] And, as to the debts of $68,897.77 owed respectively to the LA Cobb Family Trust and the BK Ross Family Trust, at this point it might seem a little curious that identical amounts are owed by Mr Ross to each trust. Leaving this to one side, however, it has been argued before me that these debts are genuine, and they relate to loan advances made to Mr Ross from the trusts to clear tax and other debts, the trusts being the owners of and receiving funding from, the family’s computing business shareholding. What is clear is that both these trusts were formed by Mr Ross and his present wife Ms Cobb in 2003 and Mr Ross has confirmed, as I note at para [24] above, that their purpose was “to protect our family assets”.

[39] Turning now to the creditors’ proposal itself, as I have noted, the terms of the proposal are simply that one of Mr Ross’ trusts, the BK Ross Family Trust is to make two gifts to him over a period of 12 months totalling in all $30,000.00. $5,000.00 of this is to be used for the provisional trustees’ expenses and the balance $25,000.00 distributed pro-rata to creditors on all unsecured debts. As I understand it, the proposal includes the ASB Bank for its total indebtedness of some $733,600.00,

given that it is described throughout as an “unsecured creditor”. Clearly if this is the case, then the lion’s share of the $25,000.00 distribution will go to the ASB Bank as the major creditor. As the source of funds for this distribution is the BK Ross Family Trust, which is itself a principal debtor under the ASB Mortgage, then the ASB in any event is effectively receiving a part repayment of its mortgage from this proposal.

[40] From the $25,000.00 available, about $17,000.00 would be paid to the ASB Bank. That would leave only some $8,000.00 for distribution amongst the other creditors. By my calculations, the share of this amount available to Ms Ross would be some $3,800.00 (about 2% of her total debt) and the share payable to the two family trusts would total about $3,150.00. The monies returned to the trusts would of course off-set a portion of the loan advance made from the BK Ross Family Trust to Mr Ross for his proposal, and the $17,000.00 (approx) payment to the ASB Bank would also reduce the liability of the two Trusts to the bank as principal debtors under the mortgage. The net effect of all this is that after expenses, of the

$25,000.00 gifted by the BK Ross Family Trust to Mr Ross, only about $4,850.00 in total would find its way to creditors other than to creditors of the Trusts or the Trusts themselves.

[41] A second matter requires some consideration. Ms Ross in her application and supporting affidavits notes that over the years Mr Ross has been the recipient of substantial amounts by way of income from his various computing businesses and undertakings. Exact details of these are not known but certainly from the accounts which have been placed before the Court, it would appear that Mr Ross (in conjunction with his present wife Ms Cobb) have enjoyed significant income from the computer business activities.

[42] On this income question, at Exhibit “BKR8” to his reply affidavit dated 13

July 2011 Mr Ross himself exhibits a copy of his New Zealand tax return for the year 1 April 2009 to 31 March 2010. This shows gross earnings for this period of

$120,000.00 and claimed expenses of $3,070.75 leaving a taxable income of

$117,679.99. Tax paid for the year is shown as $35,182.39.

[43] Although no income tax return for Mr Ross for the next financial year ending

31 March 2011 has been provided, at Exhibit “BKR2” to his earlier affidavit dated

20 June 2011, Mr Ross provides extensive details of his budgeted income and expenses for the month of June 2011 and notes specifically at para [33] of that affidavit:

33. My current income is $120,000.00 per annum. I earn this through a company called TRC Partners Limited of which I am a director. The company pays me a wage for my IT Consultancy Services. As my proposal discloses, I have few personal assets. My salary is spent as set out in attachment “BKR2” attached to this affidavit.

[44] In this budget for income and expenses exhibited as “BKR2”, Mr Ross confirms that his total net monthly income after taxes and Kiwi Saver deductions is

$7,588.66. On an annual basis, by my calculations this would amount to $91,063.92 as his total disposable income, a not inconsiderable sum.

[45] The budget goes on to outline spending of this total $7,500.00 per month, part of which Mr Ross describes as being for “generally 50% of household bills”. Presumably therefore the other 50% of the household bills are met by his wife, Ms Cobb from her own income, which one might presume to be something approaching the same order of income as declared by Mr Ross here (although, strictly speaking, that is irrelevant to present considerations).

[46] Significantly, in my view, however, Mr Ross in his budget under the heading

“General Costs” amongst other things notes $150.00 per month for “entertainment”,

$500.00 per month for “credit card payments”, $1,200.00 per month for “professional fees” which he states “includes some debt repayment”, and $175.00 per month for “finance charges”.

[47] Returning for a moment to the present creditors’ proposal advanced by Mr Ross, nowhere in that proposal is there any allowance made for a payment to creditors from Mr Ross’ future income. This is notwithstanding the fact that from his present income of $120,000.00 per annum, Mr Ross on his own admission notes that each month $175.00 is allocated for “finance charges”, $1,200.00 for “professional fees including some debt repayment” and $500.00 for “credit card payments”. It is

presumed that these payments, or at least a substantial proportion of them, would cease if the present proposal is approved, and yet no allowance has been made by Mr Ross in the proposal for any payment from this future unallocated income.

[48] It is significant also as I see it that in Mr Ross’ June 2011 monthly budget noted above there is no outgoing payment required for accommodation costs. He notes specifically that the “mortgage to home in trust (is) paid by trusts” and that no payment by way of rent or any other occupation costs of the house (other than normal utility costs) is required. Those are significant savings not enjoyed by other debtors who pay to own or occupy their own homes (even though the trusts income generated to cover those mortgage costs may come from Mr Ross’ own computer business efforts).

[49] Given all these factors, and the extent of Mr Ross’ total disposable income acknowledged by him at over $7,500.00 per month (and leaving aside any contribution to household bills – noted by him at 50% - presumably from his wife Ms Cobb) concerns must be raised here that the present proposal entirely ignores any payment to creditors from Mr Ross’ future income. This is an aspect raised by Ms Ross in her objection to the present proposal. In my view her concerns in this area are properly signalled.

[50] In addressing the principles to be applied under s 333(3)(b), the Court of Appeal in Magsons Hardware Limited v Bogiatto endorsed the observations of Asher J in Kelly v Structured Finance [2009] 2 NZLR 785 that the notion of “reasonableness” under s 333(3)(b) is best assessed objectively from the perspective of the “commercially experienced prudent creditor” rather than the general public, whose interests are protected under s 333(3)(c). Additionally, it seems the alternative touchstone of benefit to the general body of creditors in this paragraph raises issues as to the fairness of the proposal between classes of creditors. This generally requires a comparative analysis of the creditors’ relative positions under the proposal or bankruptcy respectively.

[51] Applying these principles to the present case, for the reasons outlined above,

I find that Mr Ross’ creditors’ proposal is designed in the main to benefit only one

group of creditors, being his two family trusts (through significant reduction in their ASB mortgage liability and repayment of a portion of what is yet uncalled debt owing to them) to the exclusion of the other creditors, and Ms Ross in particular. The absence of any contribution for creditors from Mr Ross’ future income, despite what is effectively his own acknowledgement that there would be likely to be a significant monthly amount available for creditors’ reduction, is in my view a substantial omission. As I see it the “commercially experienced prudent creditor” provided with a full explanation of the effects of this proposal would not regard it as being reasonable in terms of s 333(3)(b). And, given Mr Ross’ continuing earning capacity from his own company, employment which as I see it he would be unlikely to lose in any event, the absence of any contribution to creditors from future earnings, is a significant omission. I contrast this with the situation which arose in Thomas v Trustees Executors Limited, HC, Auckland, 17 December 2010 – CIV-

2010-404-154, Faire AJ, referred to me by Ms Balderstone for Mr Ross. In that case, in not entirely different circumstances, a creditors’ proposal involving a dividend to creditors of $50,000.00 per year from a lawyers’ future income, was approved.

[52] And, although from Magsons Hardware Limited v Bogiatto it is clear that, in the absence of a compelling reason to the contrary, weight should be given to the commercial judgment of the great majority of voting creditors who support a Part 5 proposal, in my view the present situation involves a proposal which for all the reasons outlined above cannot be considered to be reasonable or calculated to benefit the general body of all creditors of Mr Ross. I am not satisfied that Mr Ross’ creditors, and particularly Ms Ross and his “outside” creditors, would be worse off here if he as bankrupted rather than if the creditors’ proposal was allowed to proceed. That is sufficient to dispose of the present creditors’ proposal application which must be dismissed.

_{Section 333(3)(c) Is it expedient that the proposal not be approved?}

[53] For completeness, I now turn to consider s 333(3)(c). Although there is nothing specific before the Court to indicate serious misconduct on the part of Mr Ross here, or that he might be seen as a commercial hazard (and that there would be a risk of further harm to the general public if the proposal were to be approved),

given the matters I have noted above, his proposal in my view is significantly deficient and at worst somewhat misleading. As I see the position, it is also in the public interest that the proposal be rejected and the affairs of Mr Ross be subject to some official oversight. I find therefore, that it is not expedient that the proposal should be approved.

[54] For all these reasons, the application by Mr Ross for approval of his Part 5

creditors’ proposal therefore fails.

Adjudication Application

[55] I now turn to consider the application by Ms Ross for an order adjudicating

Mr Ross bankrupt.

[56] That application is made in terms of s 13 Insolvency Act 2006.

[57] There can be no doubt here that the provisions of s 13 are satisfied. Mr Ross as judgment debtor has clearly committed an act of bankruptcy within the period of 3 months prior to the filing of the present adjudication application. He failed to comply with the Bankruptcy Notice served on him on 31 January 2011 relating to the judgment of this Court issued against him on 7 December 2006. And, the debt in question substantially exceeds the $1,000.00 threshold provided in s 13(a) Insolvency Act 2006.

[58] Mr Ross’ opposition to the present adjudication application appears to rely solely upon s 37(c) Insolvency Act 2006. Section 37 provides the basis upon which the Court at its discretion may refuse to adjudicate a judgment debtor bankrupt. It states as follows:

37 Court may refuse adjudication

The Court may, at its discretion, refuse to adjudicate the debtor bankrupt if –

(a) the applicant creditor has not established the requirements set out in section 13; or

(b) the debtor is able to pay his or her debts; or

(c) it is just and equitable that the Court does not make an order of adjudication; or

(d) for any other reason an order of adjudication should not be made.

[59] On s 37 as I have noted above, Ms Ross as applicant creditor has clearly established the requirements set out in s 13 of the Act. Mr Ross himself has acknowledged that he is unable to pay his debts and that his liabilities exceed his assets.

[60] I turn now to address the sole ground of opposition to the present application. This is effectively that it is just and equitable that the Court should not make an order of adjudication here.

[61] From the submissions advanced before me by Ms Balderstone for Mr Ross, it appears the reasons put forward to support the contention that it is not just and equitable for an order for adjudication to be made here are:

(a) Mr Ross has tried to make a fresh start in New Zealand.

(b) He has not been engaged in conduct that requires sanction to uphold commercial morality.

(c) There is no public interest element in seeing him bankrupted.

[62] As to the first aspect, Mr Ross has been in New Zealand since 1995. The debt in question to Ms Ross arose from a judgment obtained in April 2001. Included in his current debts are a number of debts which have been incurred since he moved to New Zealand. The case of Re Bourgogne Ex.P. Banque Indosuez HC, Auckland,

9 November 1990, Master Towle, B929/90, referred to me by Ms Balderstone, in my view is quite different from the current situation and has no application here.

[63] There is nothing in this fresh start argument as I see it.

[64] As to the issue of commercial morality, Ms Ross contends here that Mr Ross did not make full disclosure of his financial position in his proposal, nor has he provided the Court with a full picture of this position. Whilst I make no distinct finding on these aspects, and I do note that there is nothing specific before me to indicate commercial immorality here, in my view, Mr Ross has been less than candid as to his entire financial employment and family situation. As I have noted above,

his proposal certainly ignored employment aspects and what is a not insubstantial future income he is likely to enjoy.

[65] The third aspect, which relates to there being no public interest element in seeing Mr Ross bankrupt, in my view is neutral here. Ms Ross argues that, given that Mr Ross may have assets in the United States or elsewhere, matters exist for the Official Assignee to investigate. There is no real evidence before me of this, however.

[66] What does appear likely though is that a real contribution to payment of Mr Ross’ debts could be made from future salary. Even on his own evidence, it does seem that he has particular skills in the computing industry and considerable earning capacity.

[67] In my view, it is in the wider public interest that the Official Assignee undertakes a proper consideration of all these aspects.

[68] I conclude therefore, that for all these reasons the arguments Mr Ross has endeavoured to advance in opposition to the present bankruptcy application are without real merit and fall well short of satisfying the onus upon him to establish that it is just and equitable, or that for some other sufficient cause, the present application for an adjudication order should not succeed.

Result

[69] For the reasons I have outlined above, I am satisfied that Ms Ross’

application for an order of adjudication must succeed. [70] Orders are now made therefore as follows:

(a) An order is made adjudicating the judgment debtor, Bryan Keith

Ross, bankrupt.

(b) Costs are awarded to the judgment creditor Ms Ross on the applications before the Court on a category 2B basis together with disbursements as fixed by the Registrar.

(c) These orders are timed at 3.30 pm today, 29 September 2011.

‘Associate Judge D.I. Gendall’

---

[1] _{At 205.}
[2] Re Bennetts’ Proposal HC Christchurch B 138/81; M306/81, 1 February 1982 at 9.