BVO Trustee Limited v Cameron [2014] NZHC 1417 (23 June 2014)

Last Updated: 18 July 2014

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2013-419-000963 [2014] NZHC 1417

UNDER	The Insolvency Act 2006
IN THE MATTER	of a proposed bankruptcy of PETER JOHN CAMERON
BETWEEN	BVO TRUSTEE LIMITED Judgment Creditor
AND	PETER JOHN CAMERON Judgment Debtor

Hearing:	23 June 2014
Appearances:	T M Braun and E R Locke for the Judgment Creditor P Cornege for the Judgment Debtor
Judgment:	23 June 2014

_{JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN}

This judgment was delivered by me on

23.06.14 at 4:00pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

BVO TRUSTEE LIMITED v P J CAMERON [2014] NZHC 1417 [23 June 2014]

[1] The judgment debtor (Mr Cameron) opposes the bankruptcy application of the judgment creditor (BVO). He says that BVO agreed with Terret Trustee Limited (Terret) to sell and assign the judgment debt to Terret, and is therefore estopped from relying on that debt for the purposes of this application.

[2] No issue is taken with the amount of $50,656.90 in respect of which the bankruptcy notice was issued and served on Mr Cameron. Rather, it is claimed that a compromise arrangement was negotiated and settled for payment of that sum. The judgment creditor denies there was any such compromise agreement negotiated with a Mr Murray Osmond on behalf of Mr Cameron.

[3] Accordingly the issue for consideration is whether BVO agreed to sell and assign the judgment debt to Terret, and is therefore estopped from relying on that debt for the purposes of this application.

The evidence

[4] Three affidavits were filed on behalf of BVO on 20 June. That from a legal assistant attached the complete email chain of correspondence between Mr Osmond and BVO’s lawyer Mr Earl. The other two affidavits were from the two co-directors of BVO. They respond to the affidavit of Mr Osmond sworn on 19 May 2014 wherein he deposed:

15. That on Monday 24 February 2014, while discussing the situation with Mrs Cameron in my office I received a telephone call from a director of BVO Trustee Limited. The call lasted for some time as he wanted me to set out in the proposal again and tell him why they should accept it as opposed to carrying on with the proceedings to bankrupt Mr Cameron. This I did. I also confirmed that I could arrange payment of the $20,000 immediately.

16. That the director advised he would discuss the offer again with his partner and advise.

17. That when he rang back he advised that they accepted the offer and that he would instruct his solicitor accordingly.

18. That at the end of the calls I advised Mrs Cameron of the outcome.

What it meant to her was that we only then had to deal with the two credit card amounts and those offers were under way. She was very pleased with the outcome.

19. That once the director advised me that BVO Trustee Limited would accept the offer from Terret Trust and that he would advise his solicitor of the acceptance so that the $20,000 (which I had in an account under my control) could be paid I began to draft an assignment of the debt.

20. That next day, the 22^nd February 2014, Mr Earl contacted me via email. He attempted to go back to his without prejudice offer.

21. That I immediately replied as follows:

“Yes your clients did contact me several times. They asked questions and then considered their position. When they rang back, (I have noted in my file) they advised me that they accepted the Trust’s offer to purchase 50 per cent of the debt for $20,000 with the balance of 50 per cent of the debt to be purchased at a later date also for $20,000. Terret therefore has an equitable interest in the debt which now needs to be perfected. I am therefore surprised at your email which says something quite different and tries to go backwards. Such an offer is not acceptable to Terret Trustee Limited. I suggest you clarify what your client has agreed to with us and forward a suitable assignment of 50 per cent of the debt. If you wish we are happy to prepare such a document but will need an up- to-date statement of position of the value of the debt as at yesterday. We confirm we hold funds for Terret Trustee Limited. Mr Cameron is in no position to offer anything better to your clients or to change the arrangements made with Terret Trustee Limited.

22. That Mr Earl responded “I have again spoken with my client. It is willing to make one amendment to the without prejudice offer proposal in my email of 3:34pm Friday 21 February and that is to give Terret up until 12:00pm Friday 28 February 2014 to make the first payment of $20,000 (plus GST if any). Should the proposal not be accepted I am instructed to file an application for adjudication of bankruptcy. My client’s position is clear and I am instructed not to correspond with you any further regarding payment”.

23. I responded the same day: “I beg to differ. Please read the email sent as it was always an offer to purchase the debt and this is what other creditors have accepted. Terret Trustee Limited stands ready to honour the arrangements made with your clients yesterday. We were advised by then that they would instruct you what had been agreed and what was agreed was very clear”.

24. That I confirm that Terret Trust was in a position as at the 25^th February 2014 as the funds were in an account controlled by me at the time.

[5] It is in response to those passages that Mr Gordon Van Ossterhout, director of

BVO, deposed:

10. I with my co-director... have had several conversations with Mr

Osmond over the course of this matter. He has strongly encouraged

the judgment creditor to accept the offer put to us despite it being considerably less than a judgment debt.

11. At paragraph 17 of his affidavit Mr Osmond states that we, on behalf of the judgment creditor, accepted the offer and advised that we would advise our solicitor accordingly. This is simple incorrect and a complete fabrication...

12. Notwithstanding... the judgment creditor has not received any funds from the third party that Mr Osmond alleges the debt was assigned to.

[6] Mr Burston the co-director deposes:

I further confirm that I have at no time agreed to any proposal of the judgment debt be assigned to a third party. I am aware of Mr Osmond’s proposal put to us on behalf of the judgment debtor. Gordon, our solicitor and I discussed the option, its benefits and risks and we were all agreed that the proposal was not in the best interests of the judgment creditor.

Application for adjudication

[7] There is no issue but that the sum the subject of BVO’s bankruptcy notice was owing. Further, the bankruptcy notice was not complied with. Accordingly the Court can adjudicate a judgment debtor bankrupt unless it is just and equitable the Court does not make an order for adjudication (s 37 of the Insolvency Act 2006) (the Act). Pursuant to s 43 of the Act a Court can halt a bankruptcy application to enable the question of whether a debt is owed to be resolved at a trial. If the Court chooses that option then it may require security to be given until that issue is determined.

Cross-examination of deponents

[8] On behalf of the judgment debtor Mr Cornege requested that BVO’s two

directors appear for cross-examination upon their affidavits.

[9] Mr Van Ossterhout and Mr Burston duly appeared for cross-examination. In that exercise Mr Van Ossterhout deposed that on 24 February 2014 he telephoned Mr Osmond for further detail regarding the payment proposal. It was clear to the Court that Mr Van Ossterhout and Mr Burston were unfamiliar with aspects of it because it involved the sale of their debt to Terret.

[10] After his initial telephone discussion with Mr Osmond on 24 February Mr Van Ossterhout telephoned Mr Burston following which he telephoned Mr Osmond again.

[11] It is Mr Osmond’s affidavit evidence that Mr Van Ossterhout told him the

offer was accepted.

[12] In response to that claim the oral evidence of the two directors was clear, namely that they agreed to nothing. Having heard the two directors the Court is satisfied without doubt that they, the directors never intended to agree, and nor did they believe they had.

[13] The Court accepts Mr Osmond was not contacted by Mr Van Ossterhout for the purpose of concluding any arrangement but rather because the directors did not fully understand the process that involved Terret buying their debt.

[14] It is clear from their evidence that the primary matter of concern was the uncertainty about the payment of the second instalment. It had not been their intention to conclude any arrangement without input from Mr Earl and so it was with their instructions that Mr Earl, the following day, emailed Mr Osmond and repeated the directors’ requirement that the second payment instalment had to be paid by a certain date in the near future.

Considerations

[15] The focus of the parties’ dispute is quite narrow. Either the parties agreed to a compromise arrangement or they did not. BVO’s two directors have been cross- examined upon their affidavits. That was done because it was requested on behalf of the judgment debtor.

[16] The affidavit evidence of the parties on this critical point is in dispute. When that is so the Court should be weary of preferring one account to the other. However in this case the Court is prepared to do so. Prior to 24 February 2014 negotiations had been conducted on BVO’s behalf by its solicitor. Although Mr Osmond may

have believed an agreement was reached, it was the intention of Mr Van Ossterhout only to seek clarification about aspects the directors did not understand.

[17] Also it was clearly intended any arrangement would be documented. Someone would have to be identified by Terret for the purpose of meeting any obligations undertaken on its behalf.

[18] The directors provided their oral evidence honestly and from the Court’s point of view sufficiently to convince the Court. The Court believes it was never the directors’ intention to accept an arrangement whereby there was an element of uncertainty regarding the payment of the second instalment of $20,000.

Conclusion

[19] The Court being satisfied there was no concluded arrangement for an assignment of Mr Cameron’s debt, and because there is no other reason offered to dispute responsibility for the debt, the Court considers there is no just and equitable cause for refusing BVO’s application for Mr Cameron’s bankruptcy adjudication.

Judgment

[20] Mr Cameron’s defence of the adjudication application fails.

[21] The application for adjudication is to be set down for hearing in the bankruptcy list in the High Court at Hamilton on 30 June 2014 at 10:00am.

[22] The costs of this hearing are fixed on a 2B basis which together with disbursements are to be paid by Mr Cameron.

Associate Judge Christiansen