Axa New Zealand Nominees Limited v Nachum [2012] NZHC 808 (26 April 2012)

Last Updated: 23 May 2012

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-2551 [2012] NZHC 808

IN THE MATTER OF the Insolvency Act 2006

BETWEEN AXA NEW ZEALAND NOMINEES LIMITED

Judgment Creditor

AND HAYIM NACHUM Judgment Debtor

Hearing: 26 April 2012

(Heard at Wellington)

Counsel: J Whalley - Counsel for Judgment Creditor

G Dewar - Counsel for South Canterbury Finance (the First

Supporting Creditor)

G Dewar - Counsel for W Crighton & Son Limited (the Second

Supporting Creditor)

R Park - Counsel for the Commissioner of Inland Revenue (the Third

Supporting Creditor) Judgment: 26 April 2012

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

Solicitors: Buddle Findlay, Solicitors, PO Box 2694, Wellington

Email: [e-mail]

Thomas Dewar Sziranyi Letts, Solicitors, PO Box 31-240, Wellington

Email: [e-mail]

R Park, Inland Revenue, PO Box 1462, Wellington

Email: [e-mail]

H Nachum, 17f Onslow Road, Khandallah, Wellington 6035

_{Email: [e-mail]}

AXA NEW ZEALAND NOMINEES LIMITED v NACHUM HC WN CIV-2011-485-2551 [26 April 2012]

[1] Before the Court is an application by the judgment creditor seeking an order to have the judgment debtor, Mr Nachum, adjudicated bankrupt.

[2] That application was formally opposed by the judgment debtor in a notice of opposition dated 29 March 2012. The opposition was supported by an affidavit of the judgment debtor sworn 29 March 2012.

[3] When this matter was last before the Court on 2 April 2012 I set it down for a formal hearing today, 26 April at 10:00am.

[4] Mr Langford who appeared as counsel for the judgment debtor throughout has filed a memorandum in this Court dated 24 April 2012. That memorandum states:

1. The judgment debtor no longer opposes the judgment creditor’s

application for bankruptcy.

2. Accordingly, the Court is able to make any orders that it sees fit.

[5] Mr Langford did not appear as counsel for the judgment debtor today. Instead Mr Nachum appeared personally.

[6] He confirmed to the Court today that he is unable to continue his opposition to the present bankruptcy application.

[7] In response to requests from the bench, Mr Nachum confirmed that he has no assets in his own name and that he has a credit card debt of approximately $20,000-

$30,000. This of course is in addition to the judgment debt in favour of AXA New Zealand Nominees Limited which is the subject of this application. That judgment debt related to a judgment issued against the judgment debtor in the High Court at Wellington on 6 December 2011 which was initially for a judgment sum of

$5,882,658.79 together with accruing interest which gave a total debt of

$6,148,268.02 as at 7 December 2011.

[8] A bankruptcy notice was issued against the judgment debtor and served upon him on 26 November 2011.

[9] There was no response to that bankruptcy notice and accordingly an act of bankruptcy occurred.

[10] The present bankruptcy application was filed in this Court on 16 February

2012 and served on the judgment debtor on 23 February 2012.

[11] As I have noted above, on 29 March 2012 the judgment debtor filed a notice of opposition to the bankruptcy application together with an affidavit in support. That notice of opposition indicated that the judgment debtor’s defence was based upon the principal ground that the judgment creditor had a security for the debt in question as a first mortgagee of a property held by a company owned and controlled by the judgment debtor. The judgment debtor complained earlier that the judgment creditor had not taken full steps to realise this security. As a result he contended that the Court should exercise its discretion not to adjudge him bankrupt.

[12] As to the issue of a security being held which might cover the debt claimed by the judgment creditor, section 14 Insolvency Act 2006 provides that a Court is not to make an order for adjudication on the application of a secured creditor unless the creditor has established that the amount of the debt exceeds the value of the charge by at least $1,000.

[13] As to that provision, it is clear from Brookers Insolvency Law and Practice at para IN 14.01 that:

However, a creditor is only a secured creditor for the purposes of the Insolvency Act 2006 if the creditor holds a charge “on or over property owned by a debtor”. Thus it seems a creditor who holds a third party security (for example, a guarantee given by the debtor, or a security granted by principal debtors, or co-covenantors), but has not been given a charge by the debtor is not a secured creditor and may, therefore, apply for adjudication as an unsecured creditor.

[14] Here, any security held for the debt owing to the judgment creditor is a security over Mr Nachum’s company as noted above. Accordingly it is clear in this case that, in terms of s14 Insolvency Act 2006, the judgment creditor does not hold a security from Mr Nachum, the judgment debtor.

[15] Notwithstanding this, in the exercise of the Court’s discretion on the present application, consideration must of course be given as to whether the debt claimed is able to be repaid by the principal debtor.

[16] In that regard the evidence before the Court is that the security property in question owned by Mr Nachum’s company has now been sold at a price of $6 million with settlement due July 2012.

[17] The debt owing to the judgment creditor and other sale expenses are such that there will be shortfall on sale of some $700,000. This shortfall will of course remain as part of the judgment debtor’s personal guarantee owing to the judgment creditor. Mr Nachum has specifically confirmed before me today that he is unable to meet this shortfall.

[18] In addition the debts owing to the supporting creditors here comprise some

$176,709 owing to the Commissioner of Inland Revenue, something in excess of $1 million owing to South Canterbury Finance (and this amount is now effectively unsecured from details provided to the Court today) together with a trade debt which may be in the vicinity of $100,000 or $200,000 owing to W Crighton & Sons Limited.

[19] As I have noted above, when the judgment debtor appeared before me today he indicated he has no assets and is in no position to meet these debts.

[20] It must follow that he is clearly insolvent.

[21] None of the grounds appearing in s37 Insolvency Act 2006 on which the

Court may refuse an order for adjudication apply here.

[22] That said the application before me by the judgment creditor must succeed and an order for adjudication must necessarily follow.

[23] The following orders are now made therefore:

(a) An order is made adjudicating the judgment debtor, Hayim Nachum, bankrupt.

(b) Costs are awarded to the judgment creditor, AXA New Zealand Nominees Limited and to the supporting creditors South Canterbury Finance Limited, W Crighton & Sons Limited and the Commissioner of Inland Revenue on a Category 2B basis together with disbursements as fixed by the Registrar.

(c) This order is timed today 26 April 2012 at 10.47 am.

‘Associate Judge D.I. Gendall’