Grosvenor Financial Services Group Limited v Tapp [2013] NZHC 2105 (19 August 2013)

Last Updated: 4 September 2013

IN BANKRUPTCY

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2013-419-177 [2013] NZHC 2105

IN THE MATTER of the Insolvency Act 2006

IN THE MATTER of the bankruptcy of Robert George Tapp

BETWEEN GROSVENOR FINANCIAL SERVICES GROUP LIMITED

Judgment Creditor

AND ROBERT GEORGE TAPP Judgment Debtor

Hearing: 19 August 2013

Counsel: LE Priest for judgment creditor

No appearance for judgment debtor

Judgment: 19 August 2013

(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for adjudication order]

Solicitors: MinterEllisonRuddWatts, Wellington

_{RG Tapp, Matamata}

GROSVENOR FINANCIAL SERVICES GROUP LIMITED v TAPP [2013] NZHC 2105 [19 August 2013]

[1] The judgment creditor applies for an order adjudicating Robert George Tapp a bankrupt.

[2] The judgment creditor obtained judgment against the judgment debtor in the

High Court at Tauranga on 14 December 2012 for $1,681,801.60.

[3] The judgment creditor applied for the issue of a bankruptcy notice. The bankruptcy notice was duly issued and served on the judgment debtor.

[4] The judgment debtor did not comply with the bankruptcy notice and thereby committed an act of bankruptcy.

[5] The judgment creditor filed the current application on 21 March 2013. The application was called on 24 June 2013. After hearing from counsel for the judgment creditor and Mr Tapp I issued a minute as follows:

[1] This is an opposed application for an adjudication order.

[2] Somewhat surprisingly, the judgment creditor’s counsel was not able

to take the first fixture offered for this proceeding, which was for

23 July 2013.

[3] When I delved further into the matter, Mr Tapp advised that he had instructed counsel to consider the issue of other proceedings that might well impact on the judgment which is the foundation for the act of bankruptcy in this case.

[4] I have explained to him that the case will presently be determined on the material that has already been filed in the court plus an affidavit in reply by the judgment creditor which I order is to be filed and served by 12 July 2013. Should he wish to introduce any further material, he will have to make the appropriate application. He would be well-advised to have legal assistance.

[5] Taking into account the fact that the judgment creditor’s counsel was not able to take the fixture offered, I allocate a one day fixture for the hearing of this application for 10am on 18 September 2013.

[6] The judgment creditor shall file and serve, by 4 September 2013, a case book of the pleadings, notice of opposition and all affidavits, which is indexed and paginated, together with submissions in support and copies of all authorities referred to.

[7] The judgment debtor shall file and serve, by 11 September 2013, submissions in opposition together with copies of all authorities referred to.

[8] Because I have real concerns as to the readiness of this fixture, the case shall be listed in the bankruptcy list at 10am on 19 August 2013 to check the readiness of the application to proceed at the fixture on

18 September 2013.

[6] The judgment debtor advances the following specific grounds in opposition:

(a) The affidavit of Gary Scott of Wellington, Chief Financial Officer of Grosvenor Financial Services Group Limited in support of the application for adjudication is misleading as to the quantum of any shortfall stated in the creditor’s application after realisation of security;

(b) The judgment of Associate Judge Doogue dated 13 December 2012 in relation to a realistic prospect of surplus recoveries after all matters in relation to the receivership of BOP Business Consultants Limited (in receivership) and any High Court action against BDO, the receivers, by the judgment debtor gives the Presiding Judge the discretion to determine whether or not to make an order for adjudication;

(c) The actions of BDO, the receivers, when acting as agents for the judgment creditor in relation to the sale of the Tax Link BOP business and the potential claim against those receivers for a sale for less than fair value creates a significant claim by the judgment debtor that can be applied in reduction of the judgment debt when settled through the High Court process.

[7] Prior to the call of this proceeding on 19 August 2013 Mr Tapp filed a letter,

with counsel’s opinion attached. His letter records:

(1) Enclosed is the opinion of Peter Gorringe, Barrister of Hamilton on my ability to bring an action against BDO, the Receivers of BOP Business Consultants Limited (In Receivership) and the Judgement Creditor listed above. In summary it says that while I may have some valid grievances against the Receiver and the Judgement Creditor, he believes that we do not have sufficient evidential

material at this stage to put before the High Court to prove negligence and to the sale process and the actions of the Receivers. I now feel that I have expired all legal options through the High Court Process in an attempt to prevent the Judgement Creditor from seeking adjudication in this instance.

(2) I will leave the Presiding Judge to make his judgement on the facts in front of him. I have no wish to frustrate the process of law where there is likelihood of a poor outcome for myself. In the interim, the Presiding Judge should be aware that the company, BOP Business Consultants Limited (In Receivership) was placed into Liquidation by the Judgement Creditor on 18 June 2013 and this means that any issues I have will now have to be taken up with the Official Assignee.

(3) I will, however, be

(a) Lodging a Formal Complaint with ICANZ, the governing body of Chartered Accountants in New Zealand against BDO for their actions and inactions as Receiver of BOP Business Consultants Limited (In Receivership)

(b) Lodging information with The Official Assignee, to also seek some clarity on what actins they may look at undertaking.

[8] Counsel for the judgment creditor has today provided a certificate in terms of r 24.20 which confirms that the debt remains unpaid.

The jurisdictional requirements

[9] The jurisdictional requirements that must be met before an order of adjudication is made are contained in ss 13 and 36 of the Insolvency Act 2006. Section 13 provides:

13. When creditor may apply for debtor's adjudication

A creditor may apply for a debtor to be adjudicated bankrupt if—

(a) the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and

(b) the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and

(c) the debt is a certain amount; and

(d) the debt is payable either immediately or at a date in the future that is certain.

[10] Section 36 provides:

36 Court may adjudicate debtor bankrupt

The Court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements set out in section 13.

[11] The jurisdictional requirements are met in this case. It is necessary, however, to also consider s 37 of the Insolvency Act 2006. Section 37 provides:

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.

[12] In Eide v Colonial Mutual Life Assurance Society I summarised the general principles involved in the exercise of the discretion under s 26 of the Insolvency Act

1967 (which is now s 37 of the Insolvency Act 2006) and noted that the important matters were the following:1

1) “A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made.” McHardy v Wilkins & Davies Marinas Ltd (Court of Appeal, Wellington, CA 54/93, 7 April 1993) at p 3.

2) “. . . in the exercise of the discretion under s 26 it is proper for the Court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.

3) In determining whether an order should be made, the wider public interest must be taken into account to determine whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public.” Re Nisbett, ex parte Vala [1934] GLR 553 at p 556.

4) “. . . on a bankruptcy petition the Court must have regard to public interest in a way which transcends the interest of the immediate parties to the proceeding. . . . The public interest in exposing and controlling an insolvent debtor is one which exists quite independently of the separate question of debt collection by his immediate creditors.” Re Fidow [1989] 2 NZLR 431 at p 444.

5) Absence of assets is a factor but:

“. . . even the undoubted absence of assets will not necessarily preclude an order, for the circumstances may be such that the debtor ought in the public interest to be visited with the disqualifications that go with bankruptcy.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.

6) Another matter:

“. . . is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely to prove more effective than an investigation conducted by other means.” Re Fidow (supra) at p 444.

7) There is a need:

“. . . for the Court to balance the various considerations relevant to the case, and to determine whether in the end the debtor has succeeded in showing that an order ought not to be made”. McHardy v Wilkins & Davies Marinas Ltd (supra) at p 4.

[13] That approach was expressly approved by the Court of Appeal.2

[14] The judgment on which the bankruptcy notice is based is not challenged. There does not appear to be a foundation for a further proceeding which might have justified the exercise of a discretion under s 37 or an order halting the proceeding under s 43. That appears to be accepted by Mr Tapp in his letter.

[15] I have already found that the jurisdictional requirements for the making of an order of adjudication in this case have been met. An order is therefore appropriate.

Orders

[16] Accordingly,

(a) I order that Robert George Tapp be adjudicated a bankrupt. This order is made at 10:55am;

(b) The fixture for 18 September 2013 is vacated as are all directions relating to same.

Costs

[17] The judgment creditor is entitled to costs based on Category 2 Band B

_{together with disbursements as fixed by the Registrar.}

JA Faire
Associate Judge