Serepisos; FM Custodians Limited and South Canterbury Finance Limited (in rec) HC Wellington CIV-2011-485-279 [2011] NZHC 1611 (29 August 2011)

Last Updated: 22 November 2011

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

_{CIV-2011-485-279}

IN THE MATTER OF the Insolvency Act 2006

AND IN THE MATTER OF the bankruptcy of ELEFTARIOUS (TERRY) SEREPISOS

BETWEEN FM CUSTODIANS LIMITED Original Judgment Creditor

AND SOUTH CANTERBURY FINANCE LIMITED (IN RECEIVERSHIP) Substitute Judgment Creditor

Hearing: 29 August 2011 (Heard at Wellington)

Counsel: G. Dewar - Counsel for Substituted Plaintiff South Canterbury

Finance Ltd (In Receivership)

A. Kraack - Counsel for Equitable Mortgages Ltd - Creditor in

Support

J. Billington QC - Counsel for Judgment Debtor

Judgment: 29 August 2011

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

Solicitors: Thomas Dewar, Solicitors, PO Box 31240, Lower Hutt Chapman Tripp, Solicitors, PO Box 2206, Auckland Kensington Swan, Solicitors, Private Bag 92101, Auckland

[1] Before the Court is an application seeking an order for adjudication in bankruptcy of the judgment debtor, Eleftarious Serepisos.

SOUTH CANTERBURY FINANCE LIMITED (IN RECEIVERSHIP) v E SEREPISOS HC WN CIV-2011-485-

279 29 August 2011

[2] On Friday last 26 August 2011 the judgment debtor filed in this Court a proposal under Part 5 subpart 2 of the Insolvency Act 2006 together with supporting material.

[3] This proposal in short is a proposal on behalf of the judgment debtor to creditors for the following:

(a) For the appointment of what are described as experienced insolvency professionals to act as trustees for the judgment debtor.

(b) For an assignment of all the judgment debtor’s secured assets to the trustee.

(c) For an order that the trustees realise these assets over a two year period or such further period as the creditors may later agree.

(d) For an order for distribution of the proceeds of this asset realisation to the creditors in accordance with their priorities.

[4] In so far as this application is concerned, there is affidavit evidence from Mr Serepisos before this Court which contends that his total assets in question valued mostly by way of registered valuation come to a figure of $232,472,000.00. This affidavit evidence contends that secured creditors of the judgment debtor including interest penalties amount to some $203,095,206.00.

[5] The affidavit evidence before the Court goes on to suggest that a sale on an orderly basis of the judgment debtor’s assets given what are essentially recent valuation figures could result in a surplus of assets over liabilities being achieved of some $30,000,000.00.

[6] I note again at this point that this Part 5 application was filed in this Court only on Friday last, 26 August 2011.

[7] Today the judgment debtor seeks an adjournment of the present bankruptcy proceeding against him until 10 October 2011. The judgment debtor suggests that this is in order that he might serve the Part 5 proposal upon his creditors. He contends this can be achieved by 2 September 2011. The judgment debtor goes on to

indicate that a Creditor’s Meeting under Part 5 could then be called on or before 23

September 2011 with a report back to this Court on or before 30 September 2011.

[8] Attached to the present Part 5 application is an affidavit sworn on behalf of Asteron Trust Services Limited, one of the creditors of the judgment debtor which, as I understand it, is owed a figure of around $3,000,000.00. This affidavit suggests that this particular creditor supports the adjournment sought as it wishes to have an opportunity to consider in depth the Part 5 proposal which is being suggested.

[9] Although understandably (given this application has only just been filed) there is no other material before me from any of the other creditors of the judgment debtor (and in this regard he suggests in his affidavit there are some twenty-six other creditors) Mr Billington QC counsel for the judgment debtor suggested before me today that these creditors should have the opportunity to consider the proposal which is being put forward.

[10] In this regard, he contended that it was a rather unique proposal in that if time is allowed for the proposed trustees to effect an orderly sale of what are some 150 residential properties and at least six larger commercial properties in Wellington, connected in some way with the judgment debtor, there is the prospect that all creditors would be paid in full.

[11] It is clear that this Court has power to grant an adjournment of the bankruptcy application which is presently before it. This has occurred in the past in other situations where Part 5 Creditors’ Proposals are put forward.

[12] In doing so, however, the Court must ensure as far as possible that any adjournment granted will not prejudice the general body of creditors of a judgment debtor and, in particular, if the debtor’s situation appears hopeless and any proposal is unlikely to be approved by major creditors, then any Part 5 application which is simply to buy time must not be countenanced.

[13] In the present case it is quite unclear to the Court at this juncture whether the proposal advanced by the judgment debtor only on Friday last could have a reasonable prospect of success.

[14] In passing, I note at this point that the judgment debtor in his 26 August 2011 affidavit stated at para 2 that he is “Unable to pay his debts as they fall due”. That affidavit, however, went on to outline the judgment debtor’s reasons why in his view this state of affairs had occurred.

[15] Under all the circumstances here, I am of the view that an adjournment should be granted in the present case. The creditors before me today, South Canterbury Finance Limited (In Receivership) and Equitable Mortgage Limited support such an adjournment being granted. And, it is important, as I see it that the position which is to be taken by the substantial creditors of the judgment debtor is known to the Court and that this occurs as soon as possible.

[16] That said, an adjournment of this matter is granted but only until a call in the List at 10.00 am on 26 September 2011. By that time all creditors will have been served with the judgment debtor’s proposal and the creditors meeting taken place. If, for example, there is major opposition then from substantial creditors, that is of course a relevant matter for the Court to take into account.

[17] On its face at this rather early point in considering such a Part 5 proposal, I would simply comment that, subject to timing issues, there may appear to be some merit in the terms advanced by the judgment debtor if indeed this might achieve an orderly sale of what are substantial properties principally as I understand it in this city. That comment, however, is based only upon the material which is presently before the Court.

[18] In conclusion I repeat that this matter is adjourned but only to a call at 10.00 am on 26 September 2011. This is to review the position and hopefully at that point receive some indication from all the judgment debtor’s creditors as to their approach and views on the Part 5 proposal and the adjudication application.

[19] One final matter raised by Mr Billington QC needs to be addressed. This is his request for an order that the Court file in this matter not be searched in the interim until the next call of this matter without reference to both myself and to counsel for the judgment debtor and to any counsel for the creditors who have noted an appearance in this matter.

[20] The reason for that order appears to relate to questions of commercial sensitivity with respect to the various properties in which the judgment debtor has an interest, properties which at some point, are likely to be placed on the market for sale. Notwithstanding that this matter has already achieved some significant publicity and discussion in the public domain, in the interim at least until the next call of this matter on 26 September 2011 I am prepared under the circumstances to accede to the request made.

[21] An order is now made, therefore, that this file is not to be searched without any request for such search being first referred to myself and counsel for the judgment debtor and counsel for those creditors who have signified an appearance in this matter and then approved by me. That order is to be reviewed on 26 September

2011. It is simply made in the interests of all parties here and in the hope that it will assist in an orderly commercial resolution and potential sell-down (if required) of all the properties in question.

‘Associate Judge D.I. Gendall’